Reddit (RDDT) delivered a stunning second-quarter earnings report, sending shares soaring more than 15% in early trading Friday.
Revenue surged 78% year-over-year to $500 million, sharply above analysts’ expectations of $426 million. Net income hit $89 million, a dramatic turnaround from a $10 million loss in the same quarter last year, while earnings per share reached $0.45 — more than double the Wall Street forecast of $0.19.
This marks Reddit’s strongest quarter since going public and highlights a rapid acceleration in both revenue growth and operational efficiency. The platform’s advertising business — which accounts for more than 93% of total sales — was the primary growth engine, generating $465 million in revenue, up 84% year-over-year.
CEO Steve Huffman credited the company’s communities and growing global footprint: “In a world where connection is increasingly rare, our communities show how valuable human conversation and knowledge really are.”
AI Tools Power Ad Revenue Surge and User Engagement
Reddit’s explosive ad growth is being driven by a suite of AI-powered tools that are changing how advertisers engage with the platform. Features like Reddit Insights allow marketers to tap into deep behavioral trends and tailor campaigns more precisely. Conversation Summary Add-ons help users engage more deeply by condensing long discussions into digestible takeaways — increasing time spent on the platform and boosting ad impressions. Meanwhile, Reddit Answers, a native search tool, transforms community discussions into a searchable Q&A layer that adds new monetizable surfaces, like conversation ads and dynamic shopping formats.
Together, these innovations have fueled strong profitability metrics. Gross margin reached 90.8%, marking the fourth consecutive quarter above 90%. Adjusted EBITDA more than doubled year-over-year to $167 million, with a 33% margin — up from 14% last year. Average revenue per user rose 47% to $4.53, reflecting both stronger pricing and better ad targeting.
User growth remained robust, with Daily Active Uniques climbing 21% year-over-year to 110.4 million. That figure was slightly ahead of expectations, although growth moderated from 31% in the first quarter. Of the total, logged-in users made up 49.3 million, while logged-out users accounted for 61.1 million.
Much of that expansion came from overseas markets, with international daily users growing 32% as Reddit introduced machine translation in 23 languages. CFO Drew Vollero noted that Reddit is “scaling sustainably,” with international growth now central to the company’s long-term strategy.
Reddit Positions Itself as the Future of Search
As traditional search undergoes a transformation — led by the rise of generative AI from companies like Google (GOOG) and OpenAI — Reddit is doubling down on its strength: real answers from real people. Huffman emphasized that the platform’s vision is to become a true destination for search, not just a supplement to it.
“Reddit is one of the few platforms positioned to become a true search destination,” Huffman said. “We offer something special — a breadth of conversations and knowledge you can’t find anywhere else.”
Already, Reddit’s search bar sees over 70 million weekly users, and Reddit Answers has reached 6 million weekly users across 12 countries. The company plans to unify Reddit Answers with its core search engine and move the search box front and center in its mobile app, ensuring that discovery remains a key part of the user experience.
Looking ahead, Reddit expects third-quarter revenue to land between $535 million and $545 million — far ahead of the $473 million forecast — with adjusted EBITDA projected at $185 million to $195 million. That guidance implies 54–56% revenue growth and sustained profitability momentum.
Conclusion
Reddit’s second-quarter results show a company firing on all cylinders — exceeding expectations on growth, profitability, and strategic execution. With an expanding global user base, powerful AI tools driving ad innovation, and a bold plan to redefine internet search, Reddit is carving out a unique space in the digital media landscape. Its combination of human connection and machine learning may prove to be one of the most powerful differentiators in today’s crowded attention economy.
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