Reddit Earnings Preview
40x forward, 12% short, and no benefit of the doubt. Can Reddit deliver today?
As the air gets sucked out the AI trade, our eyes are on retail favorite Reddit. While it’s not an AI capex beneficiary, Reddit is undeniably a great business that fits the high growth profile investors might look for outside the semiconductor trade. So can this non-AI growth story still catch a bid amid slowing momentum?
It ran from $136 to $203 on the data repricing thesis, got hit for 8% on a WSJ headline about the Google contract, and now sits at $184. In the span of three months the market priced in bear and bull cases.
Today’s print will finally settle the debate. At roughly 40x (NTM) forward earnings with 12% short interest, Reddit doesn’t get the benefit of the doubt. The stock has to earn its spot here.
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Key Terms
DAUq (Daily Active Uniques) - Reddit’s count of unique people who visit in a day, logged in or not.
WAUq - The weekly version, softer reach signal, and matters less for monetization.
Logged-out users - These are people without an account, mostly arriving from Google search. Nearly 60% of daily users.
ARPU - Average revenue per user (quarterly revenue divided by DAUq). The core of the bull case since Reddit monetizes each user well below Meta or Pinterest.
Adjusted EBITDA - Reddit’s preferred profit metric, excludes stock comp.
On valuation - When we say roughly 40x forward earnings, that’s NTM (next twelve months) EPS. On calendar 2026 estimates it’s ~37x, on 2027 ~28x.
What Happened Last Quarter
Reddit reported Q1 on April 30 and beat every consensus across the board.
Revenue was $663 million, up 69%
Ad revenue hit $625 million, up 74%
EPS came in at $1.01 against a $0.58 estimate
This sent the stock up 13%.
EBITDA margin crossed 40% for the first time, up almost 1,100 basis points from a year ago. FCF hit $311 million on $1 million of capex. Reddit is printing cash like a mature software business while still growing revenue 69%.
Global DAUq grew 17% to 126.8 million but daily US logged in users grew just 1%. Huffman said on the call that:
“DAUq is the primary focus of the company because revenue is doing very, very well. DAUq is both our mission and also fuel for the business.”
The goal is 100 million US daily users, up from around 54 million. There are already 200 million Americans on Reddit every week, so the target is getting those weekly visitors to come back every day.
ARPU picked up the slack, it jumped 54% to $9.63. Global ARPU was up 44% to $5.23 and international ARPU hit $2.02, up 51%. Jen Wong made the point that the value of an ad impression is basically the same whether the user is logged in or not, logged-in users just spend more time and see more of them.
As we covered in our last post, Huffman said Reddit is the most cited source across all AI platforms and called the Google and OpenAI deals important beyond just revenue. He put it simply on the call:
“there is no artificial intelligence without actual intelligence, and that comes from Reddit”.
