RDDT Rides on Solid ARPU Growth: Is the Growth Thesis Strengthening?

Reddit RDDT is benefiting from solid Average Revenue Per User (ARPU) growth. In the third quarter of 2025, ARPU increased 41% year over year to $5.04, indicating that portfolio expansions are driving higher monetization per user. 

The company’s ability to attract a diverse advertiser base has been a major growth driver. In the third quarter of 2025, Reddit expanded its active advertiser count by more than 75% year over year, with growth across large, mid-market and SMB businesses. This diversification has strengthened its advertising revenue, which grew 74% year over year to $549 million. 

Reddit’s investment in optimizing its advertising platform has been noteworthy. The company is well placed to benefit from the growing demand for interest and context-based digital ads. To support campaign performance and advertiser outcomes, the company has introduced tools like Reddit Pixel, Conversion API, and Dynamic Product Ads. This is driving advertiser adoption and delivering strong performance outcomes. This has been a major factor driving ARPU growth.

Another factor contributing to ARPU growth is Reddit’s focus on expanding its user base and increasing engagement. The platform reported 116 million daily active users and 444 million weekly active users, both increasing around 20% year-over-year.

Reddit’s international expansion also plays a critical role in ARPU growth. The company implemented machine translation in 30 languages and developed localized content frameworks to cater to specific interests in countries like India, Brazil, Germany, and France. In the third quarter of 2025, International ARPU rose 39% year over year to $1.84.

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. In the third quarter of 2025, Snap’s ARPU increased 2% year over year to $3.16. Snap also reports a rise in ARPU due to increased user activity on higher subscription revenues from Snapchat+, particularly with the new Lens+ tier and Platinum bundles, which attracted highly engaged users.

Pinterest is seeing strong user engagement in all regions. In the third quarter of 2025, Pinterest’s global average revenues per user stood at $1.78 compared with the year-ago quarter’s figure of $1.70. ARPU in Europe improved 31% year over year to $1.31, while the United States and Canada rose 5% year over year to $7.64. ARPU from the Rest of World increased 44% year over year to 21 cents, backed by solid demand in the retail sector.

RDDT’s Share Price Performance, Valuation, and Estimates

RDDT’s shares have gained 73.8% in the trailing six-month period, outperforming the broader Zacks Computer & Technology sector’s return of 23.5%. The company has also outperformed the Internet - Software industry’s decline of 3.1%.

RDDT Stock's Performance

RDDT shares are overvalued, with a forward 12-month Price/Sales of 15X compared with the Computer & Technology sector’s 6.55X. RDDT has a Value Score of F.

RDDT Valuation

The Zacks Consensus Estimate for 2025 earnings is pegged at $2.35 per share, unchanged over the past 30 days. This suggests 170.57% year-over-year growth.

Reddit Inc. Price and Consensus

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

RDDT 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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