Reddit Inc. (RDDT) Business Profile

What it does

Reddit operates a website and mobile apps built around online communities. Users visit to ask questions, share experiences, find recommendations and discuss interests. Communities, called subreddits, organize conversations by topic. Users can post text, links, images and videos, comment on others’ posts, and vote content up or down.

Users also create communities and volunteer as moderators. Moderators set and enforce community-specific rules, while Reddit provides tools and applies site-wide rules. People can browse without disclosing their identities, and visitors do not necessarily need to be logged in.

Reddit sells advertisers access to audiences in its feeds and conversations. A business can reach people based on their interests or place an ad in a discussion relevant to its product. Reddit also licenses access to its user-generated content to organizations seeking conversational data. Products sold directly to users include Reddit Premium and Reddit Gold.

In the three months ended December 31, 2025, Reddit averaged 121.4 million daily active uniques worldwide. Its archive contained over two billion posts and over 22 billion comments through December 31, 2025. Reddit was founded in 2005, is headquartered in San Francisco, and is led by Chief Executive Officer Steven L. Huffman.

How it makes money

Reddit reported $2.2 billion in revenue for FY2025 and $895 million for Q3 2026.

The company operates as one reportable segment and earns most of its revenue from advertising on its website and apps. FY2025 advertising revenue was $2.1 billion, or 93.6% of total revenue. Advertisers can target interests across Reddit or place ads in relevant communities and conversations. They can choose objectives such as impressions, traffic, conversions or installs, and bid in Reddit’s advertising auctions.

Ad pricing can be based on clicks, impressions, video views or a fixed fee. Reddit recognizes revenue as the contracted clicks, views or impressions occur, or as ads are delivered over the service period for fixed-fee arrangements. That period is typically less than 30 days. Advertisers can run further campaigns, but those short service periods do not make all advertising revenue contractually recurring.

Other revenue was $140.0 million in FY2025. It includes content licensing and products sold directly to users. Licensing customers pay fixed or usage-based fees for access to platform content over a contractual period; Reddit generally recognizes that revenue over the license term. Revenue from Reddit Premium and Reddit Gold was not material in the periods presented.

Reddit is expanding its advertising tools. Max campaigns use automation to adjust campaign settings, while Dynamic Product Ads let businesses create advertisements from product catalogs. In Q3 2026, Reddit introduced asset groups that let advertisers manage multiple product lines or creative themes within one Max campaign. Advertising activity has historically been seasonal, with stronger spending in the fourth quarter typically followed by a weaker first quarter.

Customers and how it sells

Reddit serves people who browse or contribute to communities, businesses that advertise to them, and organizations that license platform content. Advertisers range from small businesses to larger agencies and brands. Reddit offers managed and self-service approaches to campaign setup and management, and its licensing prospects include marketing intelligence and enterprise technology companies.

Users reach Reddit through its apps and website, including visits referred by search engines. The company’s daily active unique measure includes both logged-in and logged-out visitors. During the three months ended December 31, 2025, Reddit averaged 471.6 million weekly active uniques, and approximately 57% of visitors were outside the United States.

Revenue is more concentrated in the United States than the audience. FY2025 revenue attributed to the United States was $1.8 billion, or 81.1% of total revenue; the rest of the world accounted for $417.0 million. Revenue geography is based on customers’ billing addresses. For the three months ended December 31, 2025, average revenue per unique was $10.79 in the United States and $2.31 in the rest of the world. Reddit attributes the difference primarily to the size and maturity of the U.S. digital advertising market.

Suppliers and costs

Reddit relies on third-party infrastructure partners to host its services. Hosting and support payments are the main components of cost of revenue. Other direct costs include advertising targeting and measurement services, payment-processing fees, payments to content partners, and employee compensation.

The company also spends on engineers and other staff who develop products, on sales and marketing, and on legal, finance and other administrative functions. As of December 31, 2025, Reddit had 2,555 employees. Its primary uses of cash are employee-related costs and operating its website and apps.

For the year ended December 31, 2025, gross margin was 91.2% and operating expenses were $1.6 billion. Cost of revenue increased as hosting usage rose to support product enhancements and user growth, and as spending on other advertising services increased; lower hosting prices partly offset those increases. Because third-party partners host its services, Reddit does not incur significant capital expenditures to support revenue-generating activities.

In Q3 2026, Reddit reported approximately $76 million in cost of revenue, reflecting investments in machine learning, site performance, measurement and safety.

Competitive position

Reddit competes for people’s time and for advertising budgets. For information seeking, it names Google, Amazon, YouTube, Wikipedia, X and AI services including ChatGPT. For entertainment it names Meta’s services, YouTube, Snap, X and TikTok; for passions and hobbies, it names Facebook Groups, Discord, X and Pinterest.

For advertising, Reddit competes with major digital platforms and publishers, including Google, Meta, Snapchat, TikTok, Pinterest and X. Its content licensing business also competes with other information sources, including news, publishing, entertainment and social media.

Reddit’s communities are organized around interests, and users contribute, vote on and moderate content. Its archive and community activity give advertisers contextual signals, while its licensing customers can access platform content. The company uses first-party signals such as communities visited and content engaged with to help target advertising.

Our reading: the accumulated conversations and volunteer communities are a meaningful potential moat because they give users and licensing customers a body of content that takes time and participation to build. Our reading: Reddit’s interest and context signals support its advertising position, but that advantage is contested by other platforms competing for both audiences and ad spending. Search referrals also leave access to some users dependent on another company’s distribution.

Growth opportunities

Reddit’s growth plans center on attracting more users, making existing users return more often, and earning more revenue from their activity. It is investing in onboarding, personalized recommendations and search, including the integration of its AI-powered Reddit Answers tool into the main search experience. During the three months ended December 31, 2025, over 80 million people searched on Reddit weekly.

International expansion is another priority. As of December 31, 2025, machine translation was live in 35 languages, and Reddit had translated approximately one billion posts. The company also uses a local content framework to guide partnerships, content and marketing in individual countries.

For advertisers, Reddit plans to add targeting signals, improve campaign measurement and automation, develop ad formats and reach more businesses. It also continues to explore content licensing agreements across applications and industries. In Q3 2026, it launched a public beta of a 15-second engaged video view advertising objective.

Reddit plans to test a primarily logged-in experience in select markets outside the United States in Q4 2026. It expects the tests to inform a broader version of the experience and says the change can improve personalization, advertising signals and protection of its content. The company expects it may trade some reach for engagement. Reddit estimated Q4 2026 revenue in the range of $1 billion to $1.03 billion.

Structural risks

• User growth and retention: Reddit faces competition for users’ time. It may struggle to convert casual visitors into daily users, and excessive or poorly placed advertising, technical problems, objectionable content or changes to the platform could reduce engagement.
• Search referrals: Search referral traffic declined meaningfully in Q3 2026 and continued to decline in October. Reddit said that, if the October rate continued, total daily active uniques could fall by a low double-digit percentage in Q4 from its current base.
• Advertising demand and monetization: Advertiser spending can fluctuate with economic conditions and seasonality. Reddit also faces risks if advertisers cannot measure results, or if it cannot monetize international users at the same rate as its U.S. audience.
• Moderation and safety: Harmful content may be difficult to identify or remove promptly. Disruptions involving volunteer moderators can affect communities, while content that Reddit or advertisers consider unsuitable may not be monetizable.
• Regulation and access: Privacy, data protection, content and other rules can change or be interpreted in ways that harm the business. Governments may also restrict access to Reddit’s products.

Bottom line

Our reading

Our reading: Reddit is principally an advertising business built on conversations created and moderated by its users, with content licensing providing another way to sell access to that activity. Its archive and communities give it assets that develop through participation, but its growth depends on retaining users and convincing advertisers to spend. Declining search referrals and the planned shift toward logged-in use make the conversion of visitors into regular users important to that model.