RDDT Q3 Deep Dive: User Growth, Ad Platform Expansion, and Margin Strength

Online community and discussion platform Reddit (NYSE:RDDT) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 67.9% year on year to $584.9 million. On top of that, next quarter’s revenue guidance ($660 million at the midpoint) was surprisingly good and 3.3% above what analysts were expecting. Its GAAP profit of $0.80 per share was 54.3% above analysts’ consensus estimates.

Is now the time to buy RDDT? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Reddit delivered a strong third quarter, with results well ahead of Wall Street expectations and a significant positive market reaction. Management attributed this outperformance to robust advertising growth, successful product-led user expansion, and meaningful gains in profitability. CEO Steve Huffman cited improvements in the core Reddit product, increased engagement from new user cohorts, and the scaling of new ad formats as central to the quarter’s momentum. COO Jen Wong highlighted that both organic product changes and targeted marketing efforts contributed to a healthy mix of new daily active users.

Looking forward, Reddit’s guidance reflects confidence in sustaining high growth, with management emphasizing continued investment in core product enhancements, international expansion, and evolving monetization strategies. CFO Andrew Vollero stated, “We’re poised to scale marketing spend where we see the traction is promising,” and stressed that further automation and AI integration across ad products are expected to drive advertiser performance and platform efficiency. Management also pointed to ongoing improvements in onboarding and retention as key to maintaining user and revenue growth trends.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to strong gains in advertising, effective user acquisition strategies, and progress in international markets, while also noting improved operational leverage and targeted investments in growth initiatives.

• Advertising platform momentum: Reddit’s advertising business grew 74% year-over-year, driven by broader adoption of new ad formats and improved lower-funnel performance tools. Jen Wong explained that model improvements for app installs and conversions led to double-digit percentage increases in performance outcomes.
• Product-led user growth: CEO Steve Huffman highlighted a 20% year-over-year increase in daily active users, attributing this to enhancements in the onboarding process, dynamic personalized home feeds, and the use of AI to interpret subreddit rules, making the platform more accessible to newcomers.
• International expansion: The company accelerated growth outside the U.S. by rolling out machine translation in 30 languages and customizing content frameworks in key markets like India, Brazil, and France, resulting in notable gains in new users and engagement.
• Operational efficiency and margin expansion: CFO Andrew Vollero emphasized that operating expense growth was outpaced by revenue growth, with sales and marketing investments focused on high-return segments. The company’s adjusted EBITDA margin reached 40% for the first time, reflecting improved cost discipline.
• Publisher and partner ecosystem: Reddit launched Reddit Pro tools for publishers, enabling media organizations to better engage communities and track content performance. Early adoption by outlets like the Associated Press suggests potential for both increased platform vibrancy and future monetization as publisher engagement deepens.

Drivers of Future Performance

Management expects continued revenue and margin expansion, underpinned by ongoing investment in app user acquisition, international growth, and further automation of advertising solutions.

• Continued product investment: The company is prioritizing improvements to the app experience, onboarding, and machine learning-driven feeds. Management believes these updates will boost user retention and engagement, fueling both advertising revenue and long-term growth.
• International user acquisition: Building on recent localization efforts, Reddit plans to scale its international playbook, including targeted marketing and local partnerships in non-U.S. markets. Management sees these initiatives as critical for broadening the user base and deepening engagement.
• Ad platform automation and AI: Reddit is expanding automation across its ad stack and developing new AI-powered campaign tools. Management expects these changes to simplify campaign setup for advertisers, improve ad performance, and make self-serve advertising more accessible, all of which are anticipated to support revenue and margin gains. Risks include macroeconomic uncertainty and the need to balance investment with profitability.

Catalysts in Upcoming Quarters

Looking ahead, our team will be watching (1) the impact of product and onboarding enhancements on user retention and growth, (2) the pace of international user adoption as machine translation and localized content strategies scale, and (3) further automation and AI integration in the ad platform, particularly with respect to advertiser adoption and performance. Execution on these priorities will be central to Reddit’s ability to sustain revenue and margin momentum.

Reddit currently trades at $214.15, up from $194.54 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).

High Quality Stocks for All Market Conditions

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.