Reddit – Mid-year financials - growth and profitability
Q3 Earnings
Reddit has released some big results in Q3 2025 with revenue growing 68% YoY bringing turnover over $100m more than in the whole of 2024 with their biggest quarter still to come. Daily users (DAU) is growing steadily in the US (7% YoY) and rapidly in the RoW (31%) while average revenue per user (ARPU) is increasing even more rapidly (54% YoY in the US and 31% RoW). While the top line is growing well from both of these, the ARPU growth is really driving the bottom line forward fast as there are no direct costs associated with putting advert prices up. Net Income more than doubled from Q1-Q2 to $89m and almost doubled from Q2-Q3 to $163m. For now, costs also seem relatively restrained and, while growing, are doing so at a much slower pace than revenue. Maybe this will change as AI related hardware costs ramp up quickly as they are at other tech companies.
Share price
After a jump in the share price after Q2 earnings, September saw the share price increasing from around $215 to a mid-month peak of around $270 and then back again to a current level of $210 (at time of writing – 1st November 2025). Share price was volatile around the earnings announcement with intraday share price hitting 10% lower and 10% higher than previous close, returning slightly below where it started.
Growth
We expect a strong Q4 and steady growth continuing for the medium term. User number growth will be driven by the less profitable RoW users ($9 ARPU in US vs $2 ARPU in RoW) but with profitability increasing for all regions.
Critical Factors
We do not think revenue from data for AI content will be hugely material for the company, but it will be a nice addition as it hits straight to the bottom line. It reminds us of TSLA selling EV credits to other manufacturers but may be longer lasting. IMO, user experience does not seem to be impacted much by the ads on the platform, this is a double edged sword for the company as it is not bouncing annoyed users but advertisers know their content may be swiped over with little engagement. I suspect also a fair amount of ad clicks are accidental but that may just be me and my fat fingers! We expect seasonality to give a strong positive impact to DAU and ARPU as people over the holidays get bored and spend more time on their phones. Also, retailers will pay more for the lucrative festive market. This is likely to cause an intensified continuation of the trend so far in 2025.
Bonus – Financial Modelling Tip of the Day
Materiality is super important! Focus attention on the info that is most important, such as growth potential, profitability and events or trends that might be significant head or tail-winds. Many companies’ management may highlight a new business venture they’re entering, and its significance can vary—it could be material due to its growth potential, or it might simply be a distraction.
The RDDT financial model is available to download – forecasting the company financials for 5 years with breakdowns by quarters and years.