Reddit Inc Class A (RDDT) AI Stock Analysis

• Market Cap: $27.85B
• Dividend Yield: N/A
• Average Volume (3M): 6.00M
• Price to Earnings (P/E): 54.8
• Beta (1Y): 2.36
• Revenue Growth: 69.71%
• EPS Growth: N/A
• Country: US
• Employees: 2,233
• Sector: Communication Services
• Sector Strength: 97
• Industry: Internet Content & Information
• EPS (TTM): 1.24
• Shares Outstanding: 139,649,500
• 10 Day Avg. Volume: 4,588,300
• 30 Day Avg. Volume: 5,995,723
• PEG Ratio: -0.39
• Price to Book (P/B): 14.63
• Price to Sales (P/S): 19.45
• P/FCF Ratio: 62.62
• Enterprise Value/Market Cap: 0.97
• Enterprise Value/Revenue: 12.33
• Enterprise Value/Gross Profit: 13.52
• Enterprise Value/Ebitda: 56.58
• 1Y Price Target: $237.36
• Price Target Upside: 62.79% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 22
• EPS Forecast (FY): 4.08
• Revenue Forecast (FY): $3.13B

• Rating: 72 Outperform
• Price Target: $155.00 ▲(6.30% Upside)
• Action: Reiterated Date: 02/07/26
• Date: Action: Reiterated 02/07/26

RDDT scores well on fundamentals and the latest earnings outlook, driven by a sharp profitability/cash-flow turnaround, very low leverage, and upbeat guidance supported by strong ad momentum. The score is held back mainly by weak technicals (price far below major moving averages with bearish MACD) and a premium valuation (P/E ~52.5) that leaves less room for execution missteps.

Positive Factors

Strong cash generation

Sustained free cash flow near net income provides durable internal funding for product investment, M&A, and the $1B repurchase program. Strong cash conversion reduces reliance on external financing and gives flexibility to withstand cyclical ad slowdowns, though past inconsistency merits monitoring.

Conservative balance sheet, very low leverage

Near-zero financial leverage and a multi-billion dollar cash buffer support capital allocation optionality and downside protection. Low debt makes the company resilient to revenue variability, enables opportunistic buybacks and M&A, and reduces interest expense risk across economic cycles.

Product and ML-led ad monetization momentum

Measurable ML-driven ad performance gains strengthen advertiser ROI, supporting higher ARPU and stickier demand. Scalable improvements (shop ML, CAPI, campaign optimization) create structural differentiation versus competitors and underpin durable ad revenue growth across channels.

Negative Factors

Concentration on advertising; newer revenue nascent

Heavy reliance on ad revenue leaves topline exposed if advertiser budgets shift; search/shopping and Answers are promising but early-stage. Slow adoption of these products would limit diversification, keeping long-term growth tied to the advertising cycle and competitive ad formats.

Elevated operating costs and high stock-based compensation

Rapid OpEx and material SBC as a percent of revenue raise the company’s fixed cost base and potential dilution. If revenue growth moderates, high recurring spend and wage/marketing commitments could pressure margins and limit the sustainability of recent profitability gains.

Rising authenticity, AI-generated content and bot risks

Automated or inauthentic content threatens user trust and engagement, increasing moderation costs and complicating ad targeting quality. Over time these issues can reduce advertiser ROI, raise compliance and platform liability costs, and slow monetization unless detection and verification scale effectively.

Reddit Inc Class A Business Overview & Revenue Model

Company Description

Reddit, Inc. operates a website that organizes digital communities. It organizes communities based on specific interests that enable users to engage in conversations by sharing experiences, submitting links, uploading images and videos, and replying to one another. The company was founded in 2005 and is headquartered in San Francisco, California. Reddit, Inc. operates as a subsidiary of Advance Publications, Inc.

How the Company Makes Money

Reddit generates revenue primarily through advertising, subscription services, and premium memberships. The advertising model includes display ads, sponsored posts, and promoted content, allowing brands to target specific audiences within the platform's diverse user base. Additionally, Reddit offers a premium membership service called Reddit Premium, which provides users with an ad-free experience and various exclusive features. Partnerships with brands for sponsored content also contribute to its earnings, as companies seek to leverage Reddit's engaged community for marketing purposes. The company continuously explores new monetization strategies, such as expanding its advertising capabilities and enhancing user engagement to drive revenue growth.

Reddit Inc Class A Financial Statement Overview

Summary

Strong TTM profitability inflection with ~91% gross margin and solid operating/net margins, paired with very low leverage (debt-to-equity ~0.01) and sharply improved ROE. Cash generation is also robust (TTM operating cash flow ~$691M; free cash flow ~$684M, ~99% of net income), though durability remains the key watch given prior multi-year losses and historical cash-flow inconsistency.

Income Statement

RDDT shows a sharp profitability inflection in TTM (Trailing-Twelve-Months): revenue of ~$2.20B with strong ~91% gross margin and solid operating profitability (operating margin ~15%, net margin ~18%). This is a meaningful turnaround from 2024’s sizable losses despite continued revenue growth. The key strength is the step-change to positive earnings while sustaining high gross profitability; the main watch item is whether the newly positive margins are durable given the company’s recent multi-year history of operating losses.

Balance Sheet

The balance sheet looks very conservatively financed, with extremely low leverage (debt-to-equity ~0.01 in both TTM and 2024). Equity has grown materially versus prior years, and TTM returns on equity (~15%) improved sharply from negative levels in 2021–2024. Strengths are the low debt burden and improved shareholder returns; a remaining risk is that profitability only recently turned positive, so equity returns could be more volatile if earnings normalize lower.

Cash Flow

Cash generation is strong in TTM (Trailing-Twelve-Months), with operating cash flow of ~$691M and free cash flow of ~$684M, up ~34% versus the prior period. Free cash flow is nearly equal to net income (about ~99%), suggesting earnings are well-supported by cash. The primary weakness is historical inconsistency—cash flow was negative in several earlier years—so investors should monitor whether the current level is sustainable through cycles.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	2.20B	1.30B	804.03M	666.70M	484.92M
Gross Profit	2.01B	1.18B	693.02M	561.90M	412.35M
EBITDA	457.93M	-544.92M	-126.46M	-164.16M	-124.40M
Net Income	529.72M	-484.28M	-90.82M	-158.55M	-127.90M
Balance Sheet
Total Assets	3.24B	2.34B	1.60B	1.60B	1.65B
Cash, Cash Equivalents and Short-Term Investments	2.48B	1.84B	1.21B	1.27B	1.41B
Total Debt	23.21M	26.70M	25.75M	19.49M	13.46M
Total Liabilities	310.13M	205.85M	155.90M	125.28M	77.63M
Stockholders Equity	2.93B	2.13B	1.44B	1.47B	1.57B
Cash Flow
Free Cash Flow	684.17M	215.82M	-84.84M	-100.25M	-132.49M
Operating Cash Flow	690.88M	222.07M	-75.11M	-94.02M	-130.19M
Investing Cash Flow	-218.89M	-440.69M	41.29M	-804.18M	170.68M
Financing Cash Flow	-80.56M	379.54M	-811.00K	-3.78M	1.18B

Reddit Inc Class A Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 145.81
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RDDT, the sentiment is Negative. The current price of 145.81 is below the 20-day moving average (MA) of 149.12, below the 50-day MA of 197.55, and below the 200-day MA of 189.16, indicating a bearish trend. The MACD of -14.47 indicates Negative momentum. The RSI at 37.88 is Neutral, neither overbought nor oversold. The STOCH value of 72.44 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RDDT.

Reddit Inc Class A Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RDDT	72 Outperform	$27.85B	54.78	20.94%	―	69.71%	―
YELP	71 Outperform	$1.37B	9.88	20.02%	―	5.35%	33.74%
MTCH	67 Neutral	$7.35B	13.30	―	2.32%	-0.46%	-2.75%
PINS	66 Neutral	$11.39B	28.05	8.78%	―	16.79%	819.94%
Sector *	60 Neutral	$48.67B	4.58	-11.27%	4.14%	2.83%	-41.78%
SNAP	55 Neutral	$8.80B	-19.03	-19.46%	―	11.75%	49.19%
NXDR	51 Neutral	$678.68M	-12.43	-12.25%	―	6.65%	50.32%

Reddit Inc Class A Corporate Events

Reddit Launches Major Share Buyback After Strong 2025 Results

On February 5, 2026, Reddit reported strong fourth-quarter and full-year 2025 results, highlighted by a 70% year-over-year increase in Q4 revenue to $726 million and a 69% increase in full-year revenue to $2.2 billion, driven largely by surging advertising revenue. Daily active uniques rose 19% to 121.4 million, while profitability improved sharply: Q4 net income reached $252 million, or $1.24 in diluted earnings per share, and full-year net income swung to $530 million from a loss in 2024, supported by high gross margins above 91%, expanding adjusted EBITDA margins, and significantly higher operating and free cash flow. The company ended 2025 with $2.48 billion in cash, cash equivalents and marketable securities and a slightly lower fully diluted share count than a year earlier, then moved to return capital to shareholders with a newly authorized share repurchase program of up to $1 billion of Class A common stock, underscoring management’s confidence in Reddit’s financial momentum and its positioning for continued global expansion and product-led growth.

The most recent analyst rating on (RDDT) stock is a Buy with a $197.00 price target. To see the full list of analyst forecasts on Reddit Inc Class A stock, see the RDDT Stock Forecast page.