Reddit Benefits From Solid ARPU Growth: A Sign for More Upside?

Reddit RDDT is benefiting from solid growth in Average Revenue Per User (ARPU).  In the fourth quarter of 2025, ARPU increased 42% year over year to $5.98, indicating that portfolio expansions are driving higher monetization per user. 

The company’s efforts to expand its advertiser base have contributed to growth in ARPU.  In the fourth quarter of 2025, the platform saw a 75% year-over-year increase in total active advertiser count, with new accounts added across large, mid-market and small-to-medium businesses (SMBs).

The increase in ARPU also reflects Reddit's growing user base and engagement. In the fourth quarter of 2025, Reddit welcomed over 121 million daily active users, up 19% year over year, and 471 million weekly active users, up 24% year over year. This expanding audience provides a larger pool of impressions for advertisers, driving revenue growth.

Reddit’s international expansion has also played a pivotal role in boosting ARPU. In the fourth quarter of 2025, international revenue grew 78% year over year, outpacing 68% growth in U.S. revenue. In the fourth quarter of 2025, International ARPU climbed 38% on a year-over-year basis to $2.31.

Reddit’s ARPU growth is likely to continue as the company focuses on scaling automation, improving ad performance and expanding its global footprint. The launch of Reddit Max campaigns, an AI-powered campaign platform, is expected to streamline advertiser onboarding and drive further adoption among SMBs. Reddit’s investments in measurement tools, such as Pixel and conversion API, will help demonstrate the platform’s unique value to advertisers, further supporting ARPU growth.

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 fourth quarter of 2025, ARPU increased 5% year over year to $3.62. Snap reports a rise in ARPU due to expanding subscription offerings like Snapchat+ and Memories storage plans, increasing high-margin ad placements such as Sponsored Snaps and Promoted Places, and leveraging AI to optimize ad performance.

Pinterest is seeing strong user engagement in all regions. In the fourth quarter of 2025, Pinterste's global ARPU stood at $2.16 compared with the year-ago quarter’s figure of $2.12. ARPU in Europe improved 15% year over year to $1.59, while the United States and Canada rose 4% year over year to $9.41. ARPU from the Rest of World increased 42% year over year to 27 cents.

RDDT’s Share Price Performance, Valuation, and Estimates

RDDT’s shares have plunged 39% in the trailing six-month period, underperforming the broader Zacks Computer & Technology sector’s return of 9.7%. The company has also underperformed the Internet - Software industry’s decline of 20.3%.

RDDT Stock's Performance

RDDT shares are overvalued, with a forward 12-month Price/Sales of 8.11X compared with the Computer & Technology sector’s 6.37X. RDDT has a Value Score of D.

RDDT's Valuation

The Zacks Consensus Estimate for 2026 earnings is pegged at $3.94 per share, which has increased 5.6% over the past 30 days. This suggests 50.38% year-over-year growth.

Reddit Inc. Price and Consensus

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

RDDT currently carries a Zacks Rank #3 (Hold). 

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

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

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