Reddit Gains From Solid ARPU Growth: Is the Trend Set to Continue?

Reddit RDDT is seeing strong growth in average revenue per user (ARPU), which rose 47% year over year to $4.53 in the second quarter of 2025. This growth can be attributed to the platform’s ability to provide unique advertising options and improve performance for advertisers.

The company’s advertising revenues grew 84% year over year to $465 million in the second quarter of 2025. This has been a major factor driving ARPU growth, aided by new ad formats, automation, and measurement tools.

Key drivers include the adoption of Dynamic Product Ads, which consistently achieve a return on ad spend that is, on average, 2 times higher than standard conversion campaigns. Reddit’s focus on automation, including the introduction of auto-bidding and integration with third-party tools like Smartly, has made it easier for advertisers to scale and optimize their campaigns. These advancements are likely to attract more advertisers, further boosting ARPU.

The company is also expanding its advertiser base, with active advertiser count growing by more than 50% year over year in the second quarter of 2025. This indicates a broadening appeal across large, mid-market, and small businesses, which could sustain ARPU growth in the future.

Reddit’s international expansion also plays a critical role in ARPU growth. With machine translation available in 23 languages, the platform is reaching new markets in Asia, Europe, and Latin America. In the second quarter, International ARPU rose 40% year over year to $1.73.

RDDT Faces Stiff Competition

RDDT is facing stiff competition from competitors like Pinterest PINS and Snap SNAP, which are also expanding into advertising to compete in the rapidly growing digital ad market.

Snap is seeing steady user engagement. Its global ARPU increased to $2.87 in the second quarter of 2025, up from $2.86 in the second quarter of 2024. Snap also reports a rise in ARPU due to increased user activity on Spotlight and higher subscription revenues from Snapchat+, particularly with the new Lens+ tier.

Pinterest is seeing strong user engagement in all regions. The company has made several changes to improve personalization on the platform. The AI-powered Pinterest Performance+ suite has gained significant popularity among advertisers around the world. In the second quarter of 2025, Pinterest reported that the global average revenue per user (ARPU) was $1.74, up from the year-ago quarter’s figure of $1.64.

RDDT’s Share Price Performance, Valuation, and Estimates

RDDT’s shares have gained 63.1% year to date, outperforming the broader Zacks Computer & Technology sector’s return of 20.4% and the Internet - Software industry’s appreciation of 24.2%.

RDDT Stock Performance

RDDT shares are overvalued, with a forward 12-month Price/Sales of 19.72X compared with the Computer & Technology sector’s 6.98X. RDDT has a Value Score of F.

Price/Sales (F12M)

The consensus mark for 2025 earnings is pegged at $1.82 per share, which has increased by a penny in the past 30 days. This suggests 154.65% year-over-year growth.

Reddit Inc. Price and Consensus

Reddit Inc. price-consensus-chart | Reddit Inc. Quote

Reddit currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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