Reddit, Inc. (RDDT): A Bull Case Theory

We came across a bullish thesis on Reddit, Inc. on Darius Dark Investing’s Substack. In this article, we will summarize the bulls’ thesis on RDDT. Reddit, Inc.'s share was trading at $216.47 as of November 28th. RDDT’s trailing and forward P/E were 99.76  and 61.35 respectively according to Yahoo Finance.

Reddit, Inc. operates a digital community in the United States and internationally. RDDT, historically viewed as a chaotic digital forum, has transformed into a compelling investment with a unique strategic position in the AI era. The company’s core advertising business remains strong, driving revenue growth and profitability, but the long-term upside lies in monetising its vast repository of authentic human conversations.

Reddit’s platform hosts millions of topic-specific communities, providing high-quality, structured data critical for training AI systems. Landmark licensing deals with Google and OpenAI, generating over $130 million annually, demonstrate the strategic value of this asset and mark the beginning of a high-margin, recurring revenue stream. This initiative not only diversifies revenue beyond advertising but also creates a flywheel effect: AI licensing revenue funds product improvements, which attract more users and further enrich Reddit’s data, enhancing its future pricing power.

Financially, Reddit is showing transformative momentum. In Q2 2025, revenue surged 78% year-over-year to $500 million, while net income reached $89 million, driven by a 90.8% gross margin. Daily active users grew 21% to 110.4 million, with ARPU up 47% to $4.53, reflecting effective monetisation alongside user growth.

The company is also expanding globally, addressing the under-monetised international user base through multilingual support, localised content, and community engagement, particularly in high-potential markets like India, Brazil, and the Philippines. This expansion not only boosts revenue but enriches Reddit’s AI dataset with diverse, non-English content, increasing its strategic value for licensing deals.

Despite a demanding valuation, Reddit’s superior growth, profitability, and defensible community-driven model set it apart from peers. While risks remain around content moderation and user sentiment, the convergence of advertising, AI licensing, and international expansion positions Reddit as a rare technology company where the most human place on the internet may also become one of the most valuable.

Previously we covered a bullish thesis on Reddit, Inc. (RDDT) by mylizard in December 2024, which highlighted untapped revenue potential through better monetisation, user engagement incentives, and content authenticity improvements. The company's stock price has appreciated approximately 29.49% since our coverage. This is because the thesis played out. Darius Dark shares a similar view but emphasizes Reddit’s AI data licensing and global expansion as key growth drivers.

Reddit, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 74 hedge fund portfolios held RDDT at the end of the second quarter which was 72 in the previous quarter. While we acknowledge the potential of RDDT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.