| | | Reddit signals 55% Q3 revenue growth outlook as user engagement and ad innovations accelerate
Jul. 31, 2025 9:08 PM ET
AI-Generated Earnings Calls Insights
Earnings Call Insights: Reddit (RDDT) Q2 2025
Management View- Steven Ladd Huffman, CEO, highlighted "particularly strong performance on the revenue and profitability lines," citing 78% year-over-year revenue growth to $500 million and a 21% increase in daily active users to 110 million. He noted, "This was our most profitable quarter yet" and stressed the company's strategic focus, stating, "We are deprioritizing a few initiatives, including our work on the user economy," to concentrate on core product improvements, search, and international expansion.
- Huffman emphasized Reddit's unique position as "the #1 most cited domain for AI across all models" and described the platform as "one of the most important and differentiated data sources" for large language models.
- COO Jennifer L. Wong underlined the company's product and ad platform strategy, noting, "Total revenue reaching $500 million, up 78% year-over-year," and described strong ad business momentum, with advertising revenue up 84% year-over-year to $465 million and active advertiser count expanding by over 50%.
- Andrew Vollero, CFO, stated, "Adjusted EBITDA hit $167 million in Q2 and GAAP net income reached $89 million. We found a sweet spot this quarter with both revenue growth and profitability."
Outlook- CFO Vollero provided forward-looking guidance for Q3 2025: "We estimate revenue in the range of $535 million to $545 million, representing 54% to 56% year-over-year revenue growth with a midpoint of about 55%. Adjusted EBITDA in the range of $185 million to $195 million, representing approximately 100% to 110% year-over-year growth and an adjusted EBITDA margin of 35% at the midpoint."
- Management stated ongoing plans to "continue these investments for the second half of the year" in marketing, with spend levels to be modulated by market traction, user retention, and returns.
Financial Results- Revenue reached $500 million in Q2 2025, with U.S. revenue up 79% and international revenue up 71% year-over-year. Advertising revenue was $465 million, while other revenue, including data licensing, was $35 million.
- Average Revenue Per User (ARPU) rose 47% to $4.53.
- Adjusted EBITDA margin was 33% and net income margin was 18%.
- Gross margins expanded to 90.8%, marking the fourth consecutive quarter above 90%.
- Free cash flow for Q2 was $111 million, and cash and investments ended at $2.06 billion.
- Total adjusted costs increased 38% year-over-year, attributed to higher variable costs and strategic investments in sales, search/ML, and marketing.
Q&A- Brian Thomas Nowak, Morgan Stanley: Asked about U.S. user trends and ad innovations. CEO Huffman responded, "We got off to a slower start in April. We saw a better traction as the quarter played out...our Q2 exit number was higher than the Q2 average of 110 million."
- Ronald Victor Josey, Citi: Inquired about Reddit Answers and advertiser relationships. Huffman explained, "Our focus right now is on unifying the Reddit search...and the new Reddit Answers product," while COO Wong noted "most of our growth still comes from existing advertisers that are well retained and having a great experience."
- Benjamin Thomas Black, Deutsche Bank: Probed data licensing and early marketing learnings. Huffman stated, "We believe Reddit is in a really good strategic position as a result of this," and Wong shared, "We're just building this capability and starting to do some initial testing."
- Thomas Steven Champion, Piper Sandler: Asked about engagement and increased sales/marketing spend. Huffman said, "Engagement and time spent, both continue to be solid," and CFO Vollero quantified marketing spend as "a low double-digit million spend in the quarter."
- Mark Elliott Shmulik, Bernstein: Asked about scroller/seeker mix and search cohort usage. Huffman noted, "We expect to grow our users should do both in a day," and outlined plans to integrate Reddit Answers into the core experience.
- Unidentified Analyst (JPMorgan): Queried Reddit Lite's international rollout. Huffman described UI improvements being rolled out to the core app.
- Richard Scott Greenfield, LightShed Partners: Asked about exclusive data licensing. Huffman replied, "I think it's too soon to say what the shape of kind of future partnerships may be."
- Jason Stuart Helfstein, Oppenheimer: Queried Google's evolving product and AI mode impact. Huffman explained, "The Reddit Corpus is really important to these products and important to people more broadly."
- Andrew M. Boone, Citizens: Asked about international self-sustainability and ad auction breadth. Huffman detailed moderator recruitment and content localization efforts; Wong discussed end-to-end automation for smaller advertisers.
- Bradley D. Erickson, RBC: Questioned evolution compared to other social channels. Wong pointed to improved ROAS and the early traction of Reddit Pro in converting business profiles to ad customers.
Sentiment Analysis- Analysts' tone was positive, with questions focused on growth drivers, international expansion, and product advancements.
- Management maintained a confident and occasionally defensive tone, especially when emphasizing user growth and the evolving ad business. Huffman stated, "As I said before, we control our own destiny."
- Relative to the previous quarter, analyst questions remain growth-oriented, but there is greater focus on international expansion and monetization levers.
- Management showed increased confidence, using phrases like "we are confident" and highlighting execution and strategic positioning.
Quarter-over-Quarter Comparison- Management raised Q3 revenue guidance to a 54%-56% growth range, up from Q2's guidance midpoint of 50% in the previous quarter.
- Strategic focus shifted from a broader set of initiatives to a more concentrated effort on core product, search, and internationalization, deprioritizing the user economy.
- Analysts' focus widened to include international self-sustainability and scaling automation for advertisers.
- Key metrics, including revenue, daily active users, ARPU, and profitability, all accelerated sequentially.
- Management's tone became more assertive about Reddit's unique value in AI and data licensing.
Risks and Concerns- Management acknowledged variability in Google-driven traffic, with Huffman saying, "Traffic from Google varies from week to week. But overall, it was a headwind in Q2."
- Increased investment in marketing and international expansion carries cost risks, with CFO Vollero noting, "We plan to continue these investments for the second half of the year."
- There is ongoing uncertainty around the future structure of data licensing partnerships.
- Analyst concerns centered on sustaining growth rates, scaling ad innovations, and executing on international strategy.
Final Takeaway
Reddit delivered its fastest revenue growth since 2022, reaching $500 million and marking its most profitable quarter yet, while DAUs climbed to 110 million. Management is prioritizing core product improvements, AI-powered search integration, and international expansion, with Q3 revenue guidance targeting $535 million to $545 million and adjusted EBITDA of $185 million to $195 million. Strategic investments in ad products, automation, and marketing are set to continue, supporting ambitions to deepen user engagement and broaden Reddit’s global footprint.
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