Online community and discussion platform Reddit (NYSE:RDDT) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 77.7% year on year to $499.6 million. On top of that, next quarter’s revenue guidance ($540 million at the midpoint) was surprisingly good and 14.2% above what analysts were expecting. Its GAAP profit of $0.45 per share was significantly above analysts’ consensus estimates.
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Reddit (RDDT) Q2 CY2025 Highlights:
- Revenue: $499.6 million vs analyst estimates of $426.3 million (77.7% year-on-year growth, 17.2% beat)
- EPS (GAAP): $0.45 vs analyst estimates of $0.19 (significant beat)
- Adjusted EBITDA: $166.7 million vs analyst estimates of $129.3 million (33.4% margin, 29% beat)
- Revenue Guidance for Q3 CY2025 is $540 million at the midpoint, above analyst estimates of $472.7 million
- EBITDA guidance for Q3 CY2025 is $190 million at the midpoint, above analyst estimates of $160 million
- Operating Margin: 13.6%, up from -11% in the same quarter last year
- Free Cash Flow Margin: 22.2%, down from 32.3% in the previous quarter
- Domestic Daily Active Visitors: 50.3 million, up 4.8 million year on year
- Market Capitalization: $27.55 billion
“Reddit is built for this moment. In a world where connection is increasingly rare, our communities show how valuable human conversation and knowledge really are,” said Steve Huffman, Reddit Co-Founder and CEO.
Company Overview
Founded in 2005 by two University of Virginia roommates, Reddit (NYSE:RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Reddit grew its sales at an incredible 41.2% compounded annual growth rate. Its growth surpassed the average consumer internet company and shows its offerings resonate with customers, a great starting point for our analysis.
This quarter, Reddit reported magnificent year-on-year revenue growth of 77.7%, and its $499.6 million of revenue beat Wall Street’s estimates by 17.2%. Company management is currently guiding for a 55% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 24.9% over the next 12 months, a deceleration versus the last three years. Despite the slowdown, this projection is healthy and implies the market sees success for its products and services.
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Domestic Daily Active Visitors
User Growth
As a social network, Reddit generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.
Over the last two years, Reddit’s domestic daily active visitors, a key performance metric for the company, increased by 33.7% annually to 50.3 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction. 
In Q2, Reddit added 4.8 million domestic daily active visitors, leading to 10.5% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Reddit’s audience and its ad-targeting capabilities.
Reddit’s ARPU fell over the last two years, averaging 1.7% annual declines. This isn’t great, but the increase in domestic daily active visitors is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Reddit tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace. 
This quarter, Reddit’s ARPU clocked in at $7.87. It grew by 27.3% year on year, faster than its domestic daily active visitors.
Key Takeaways from Reddit’s Q2 Results
We were impressed by Reddit’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. We were also excited its revenue and EBITDA outperformed Wall Street’s estimates by a wide margin in the reported quarter. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 13.3% to $182.50 immediately following the results.
Reddit may have had a good quarter, but does that mean you should invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.