Reddit (NYSE:RDDT) Posts Quarterly Earnings Results, Beats Estimates By $0.07 EPS

Reddit (NYSE:RDDT) posted its earnings results on Thursday. The company reported $1.40 earnings per share (EPS) for the quarter, beating the consensus estimate of $1.33 by $0.07, FiscalAI reports. Reddit had a net margin of 31.35% and a return on equity of 29.02%. The firm had revenue of $894.96 million during the quarter, compared to analysts’ expectations of $874.91 million. During the same period in the previous year, the business posted $0.80 EPS. The business’s revenue was up 53.0% compared to the same quarter last year.

Here are the key takeaways from Reddit’s conference call:

• Strong Q3 financial performance: Revenue rose 53% year over year to $895 million, while free cash flow nearly doubled to $363 million and adjusted EBITDA margin reached 45%. Reddit also surpassed $3 billion in trailing 12-month revenue.
• Advertising momentum remained broad-based: Advertising revenue increased 54% to $847 million, supported by more than 50% growth in clicks, more than tripling conversion volume, strong international and mid-market growth, and rising adoption of Reddit Max campaigns.
• Search referral traffic is declining sharply: Management said Google-related referral declines accelerated in Q3 and continued into Q4, with October referrals down by more than 1 million per week on average. If the trend persists, total daily active users could fall by a low-double-digit percentage in Q4 from the current 130 million base.
• Reddit plans to test a logged-in-only experience: Tests will begin in select markets outside the U.S. in Q4, aiming to improve personalization, engagement, ad targeting, regulatory flexibility, and protection of Reddit’s data corpus, though management acknowledges the change may trade reach for higher-value engagement.
• Q4 outlook remains strong: Management expects revenue of $1.0 billion to $1.03 billion, representing 38% to 42% year-over-year growth, and adjusted EBITDA of $480 million to $510 million, with an approximately 49% margin at the midpoint.

Reddit Stock Down 3.3%

Shares of NYSE RDDT traded down $4.41 during midday trading on Thursday, hitting $130.29. The stock had a trading volume of 17,503,779 shares, compared to its average volume of 4,249,091. The stock has a 50 day simple moving average of $151.54 and a 200-day simple moving average of $161.02. The company has a market capitalization of $25.07 billion, a PE ratio of 31.33, a P/E/G ratio of 0.62 and a beta of 2.05. Reddit has a 1 year low of $119.27 and a 1 year high of $263.50.

Wall Street Analyst Weigh In

A number of research analysts have weighed in on the stock. Roth Capital reiterated a “neutral” rating and issued a $145.00 price objective on shares of Reddit in a research report on Monday, August 3rd. Deutsche Bank Aktiengesellschaft set a $200.00 target price on Reddit in a research report on Friday, July 31st. Truist Financial lifted their price target on Reddit from $265.00 to $275.00 and gave the company a “buy” rating in a research note on Friday, July 31st. Jefferies Financial Group set a $250.00 price target on Reddit in a report on Friday, July 10th. Finally, KeyCorp started coverage on Reddit in a research report on Wednesday, July 29th. They set an “overweight” rating and a $225.00 price target on the stock. Three research analysts have rated the stock with a Strong Buy rating, seventeen have assigned a Buy rating and nine have issued a Hold rating to the company’s stock. Based on data from MarketBeat.com, Reddit currently has a consensus rating of “Moderate Buy” and a consensus price target of $219.29.

Insider Buying and Selling

In related news, COO Jennifer Wong sold 75,000 shares of the company’s stock in a transaction dated Friday, August 14th. The shares were sold at an average price of $178.55, for a total transaction of $13,391,250.00. Following the completion of the sale, the chief operating officer owned 1,050,339 shares of the company’s stock, valued at approximately $187,538,028.45. This represents a 6.66% decrease in their position. The sale was disclosed in a legal filing with the Securities & Exchange Commission, which is accessible through the SEC website. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, Director Robert Sauerberg sold 5,128 shares of the business’s stock in a transaction that occurred on Tuesday, August 25th. The stock was sold at an average price of $159.92, for a total value of $820,069.76. Following the transaction, the director owned 27,087 shares in the company, valued at approximately $4,331,753.04. This represents a 15.92% decrease in their ownership of the stock. Additional details regarding this sale are available in the official SEC disclosure. Over the last three months, insiders have sold 306,052 shares of company stock worth $49,754,523. 28.48% of the stock is owned by insiders.

Key Stories Impacting Reddit

Here are the key news stories impacting Reddit this week:

• Positive Sentiment: Q3 results exceeded expectations. Reddit reported earnings of $1.40 per share versus the $1.31–$1.33 analyst consensus, while revenue increased 53% year over year to approximately $895 million, ahead of estimates near $875 million. EPS also rose from $0.80 in the year-ago quarter. Reddit Inc. Q3 Earnings and Revenues Beat Estimates
• Positive Sentiment: The company’s profitability remained strong, with a reported 31.35% net margin and 29.02% return on equity. Zacks Research also upgraded Reddit from “Hold” to “Strong Buy,” providing a potentially supportive analyst signal. Zacks Research rating
• Neutral Sentiment: Reddit is testing a “For You” feed alongside its “Following” feed, a move intended to improve content discovery and engagement but still unproven financially. Reddit adopts the For You feed
• Negative Sentiment: Forward guidance and user trends overshadowed the earnings beat. Reports indicated that the company’s outlook pressured the stock, raising concerns that growth could moderate despite the strong quarter. Reddit Q3 highlights
• Negative Sentiment: U.S. daily users declined by roughly 0.9 million, while international users increased by 15.2 million. Because Reddit generates about $13.82 per U.S. user per quarter versus $2.43 internationally, the geographic mix shift could weigh on monetization and future revenue quality. Reddit earns more from fewer U.S. users
• Negative Sentiment: Google search referrals to Reddit have declined amid AI-powered search changes. Management plans to test requiring visitors to log in, which could reduce scraping and improve registration but may also limit casual traffic and further expose user-growth concerns. Reddit search traffic declines

About Reddit

Reddit, Inc operates a global online platform where users participate in communities organized around shared interests, topics and activities. Members can submit text posts, links, images and videos, as well as comment on and vote on content. The platform includes thousands of communities, commonly known as subreddits, covering subjects such as news, entertainment, technology, sports, finance and lifestyle.

Reddit generates revenue primarily through digital advertising, offering advertisers access to audiences based on community interests and user engagement.