Reddit’s focus on community and search continues to drive revenue
Reddit continued to grow at pace in Q2, with revenue jumping 78% year on year to $500m.
Ad revenue drove the vast majority of this growth, after increasing 84% to $465m. As pointed out by chief financial officer Drew Valero during the earnings call, performance advertising and brand advertising both grew by more than 80%.
Adjusted Ebidta reached $167m — an improvement of $127m from a year earlier. Gross margin also expanded to 90.8%.
Notably, global daily active unique users went up by 21% to 110.4m. Average revenue per user rose 47% to $4.53 — still a low figure but one that the company recognised as “an opportunity”.
Of all regions, the US was strongest, with revenue up 79% to $409m. In Europe, France, the Netherlands and the UK were highlighted as strong-performing markets.
Reddit’s stock rose by 7.54% in after-hours trading following the earnings announcement, closing at $161.
Analysis: A distinct role
Reddit’s sustained growth points to the success of its strategy of leaning in to its usefulness as a community tool and its increasing importance in search.
CEO Steve Huffman stated in the earnings call: “We offer something special — a breadth of conversations and knowledge you can’t find anywhere else.”
Given the importance of advertising to the business, this is a positioning that Huffman would no doubt hope advertisers agree with. Indeed, he opened the call listing meeting advertisers in Cannes as one highlight of the year.
Huffman noted: “They want to work with us. They understand our distinct role on the internet and they recognise we deliver real value to their businesses.”
According to chief operating officer Jen Wang, the total number of active advertisers on Reddit grew by over 50% in Q2, spanning large, mid-market as well as small and medium-sized businesses.
She added: “Ongoing investments in our ad models and formats are driving performance improvements, including higher click and conversion volume and incremental return on adspend.”
Reddit CEO Steve Huffman: ‘People hate ads, but they love brands’
Connection in an AI era
Huffman also referenced how during a time when human voices are increasingly diminished due to AI, the platform holds a unique position.
“In a world where connection is increasingly rare, our communities show how
valuable human conversation and knowledge really are,” he said.
“And for brands, Reddit’s authenticity creates something rare — a direct connection with people when they’re seeking trustworthy opinions. As more of the content you see online is synthesised, summarised and sanitised by AI, Reddit stands out for its honesty and subjectivity.”
That said, the platform plans to continue investing in AI and personalisation technologies, recognising the platform as “the backbone of building AI that actually works”. This includes using AI to “help people find their home”, through real-time personalisation or smarter community discovery.
Another key focus is search. Its core search product now has 70m weekly users, while Reddit Answers has grown to 6m from 1m in Q1. The company will expand the latter feature globally.
Calling Reddit a “true search destination”, Huffman argued that the platform offers “a breadth of conversations and knowledge you can’t find anywhere else”.
This is a theme Huffamn touched on during an interview in Cannes, where he discussed how the rise in search is not simply a debate of Google vs ChatGPT. “There will be lots of new players in search,” he told WPP non-executive director Keith Weed. “I hope we can be one of them.”
Looking ahead, Reddit projects Q3 revenue of between $535m and $545m, representing 54-56% growth year on year.
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