Reddit, Inc. Class A ((RDDT)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Reddit’s latest earnings call painted a picture of robust growth and strategic expansion, with the company showcasing impressive revenue and user base increases. Despite some challenges in traffic acquisition and initiative prioritization, the overall sentiment was overwhelmingly positive, highlighting Reddit’s successful international expansion and new product offerings.
Record Revenue Growth
Reddit reported a remarkable 78% year-over-year revenue growth, reaching $500 million. This marks the fastest quarterly growth rate since 2022, underscoring the company’s strong market position and effective monetization strategies.
Significant Increase in Daily Active Users
The platform’s daily active users surged to 110 million, a 21% increase from the previous year. This growth was fueled by product improvements and enhanced marketing efforts, reflecting Reddit’s commitment to user engagement.
Advertising Revenue Surge
Advertising revenue saw an impressive 84% year-over-year increase in Q2, totaling $465 million. The active advertiser count expanded by over 50%, showcasing Reddit’s growing appeal to advertisers.
Strong Profitability Metrics
Reddit’s adjusted EBITDA reached $167 million, with a margin of 33%, while GAAP net income was $89 million. These figures highlight the company’s strong profitability and efficient cost management.
International Expansion
Reddit’s international reach expanded with machine translation now available in 23 languages, enhancing its presence in Asia, Europe, and Latin America. This strategic move is expected to drive further user growth globally.
Introduction of New Ad Products
The launch of new ad formats such as Dynamic Product Ads and Reddit Community Intelligence has enhanced the advertiser experience, contributing to improved performance and engagement.
Positive Cash Flow
The company ended Q2 with a positive free cash flow of $111 million, representing a 22% margin of revenue, indicating strong financial health and operational efficiency.
Challenges with User Economy Initiatives
Reddit faced challenges with its user economy initiatives, leading to a deprioritization to focus on more pressing projects. This strategic shift aims to optimize resource allocation and project outcomes.
Headwinds in Google Traffic
Traffic acquisition from Google presented a headwind in Q2, impacting user acquisition strategies. Reddit is likely to explore alternative strategies to mitigate this challenge.
Increased Cost Growth
Total adjusted costs increased by 38% year-over-year, driven by higher variable cost expenses and strategic investments. This reflects Reddit’s commitment to growth and expansion, despite the rising costs.
Forward-Looking Guidance
Looking ahead, Reddit provided optimistic guidance for Q3 2025, projecting revenue between $535 million and $545 million, reflecting a 54% to 56% year-over-year growth. The adjusted EBITDA is expected to be between $185 million and $195 million, representing a 100% to 110% increase. The company remains focused on enhancing user engagement, improving core products, and expanding internationally.
In summary, Reddit’s earnings call highlighted a period of significant growth and strategic initiatives, with positive sentiment prevailing despite some challenges. The company’s focus on revenue growth, user engagement, and international expansion positions it well for future success.