RDDT

Overview

• Reddit, Inc. is a global digital community platform founded in 2005 and headquartered in San Francisco. It hosts a vast array of interest-based communities ("subreddits") where users can share content, engage in discussions, and interact. 

Q2 Performance

Q2 2025 Earnings Surge: Reddit’s Q2 earnings blew past expectations:

• Revenue: $500 million (+78% YoY)

• Ad Revenue: $465 million (+84% YoY)

• Net Income: $89 million (EPS: $0.45), recovering from a $10 million loss (EPS: -$0.06) in Q2 2024

• User Growth: Daily active users (DAUs) +21% YoY to 110.4 million; international DAUs +32% to 60.1 million 

• Operating Margin: Notable gross margin of 90.8% 

• Forward Guidance:

  • Q3 revenue estimate: $535M–$545M

  • Adjusted EBITDA: $185M–$195M 

Momentum Indicators: Following this earnings report, RDDT shares surged 18%–20% in after-hours trading. Analysts continue to raise their outlooks, with Truist and Raymond James upping targets to $225 citing strong advertising and growth in AI-powered search tools.

Investment Strengths 

Explosive Profitability Turnaround: Achieving consistent GAAP profits (fourth consecutive profitable quarter) positions Reddit favorably among tech peers.

Robust Advertising Business: Ad revenue growth (84% YoY) and rising advertiser count (+50%) indicate strong monetization traction.

Global User Expansion: Rapid international DAU growth (32%) and expanded language support via machine translation (now 23 languages) enhance global penetration.

Innovative AI Integration: Reddit Answers, its AI-powered search assistant, grew to 6 million weekly users and is being embedded deeper into core search functionality.

Index Inclusion Potential: Joining Russell 3000 and 1000 indexes increases exposure; S&P 500 consideration could further broaden investor base

Risk Factors 

Valuation Disparity: Current trading (~$217) exceeds most 12-month targets (e.g., $178–$199 range), suggesting upside could be limited without further catalysts.

Profitability Sustainability: While Q2 was highly profitable, continuity of margins under rising investments and competition is uncertain.

Ad Market Sensitivity: Heavy reliance on advertising revenue makes Reddit vulnerable to macroeconomic downturns or shifts in ad spend trends.

Content & Regulatory Risks: As a user-generated platform, Reddit faces potential moderation challenges and regulatory scrutiny affecting user trust and monetization.