Reddit revenue jumps 61% as US user slip stokes growth fears

Reddit reported Q2 revenue of $805 million, up 61% from a year earlier, as a sequential dip in US daily users stoked growth concerns.

"We're not building for drive-by traffic. We're building a daily destination," Chief Executive Officer Steve Huffman said on the call.

Advertising revenue rose 64% to $762 million, while adjusted EBITDA reached $343 million, a 43% margin that grew 106% year over year. Net income more than doubled to $253 million, or $1.25 a diluted share, from $89 million a year earlier. Operating cash flow hit $262 million, lifting the trailing 12-month total above $1 billion for the first time.

The stock fell after hours as US daily active users slipped sequentially, even as weekly actives crossed 500 million globally. Management attributed the decline to choppy search referrals, particularly from AI overviews, which offset product-driven gains. New app user retention rose 50% year over year, Huffman said, as the company converts web users into higher-value app users.

Ad business broadens as automation scales

Advertising revenue growth was broad-based, with international revenue up 84% to $167 million and US revenue up 56% to $638 million. Active advertisers grew more than 70% year over year, and revenue from the automated Reddit Max suite rose over 150% sequentially from the first quarter. Dynamic product ads and app installs each more than doubled revenue year over year, while the scale channel serving mid-market and small businesses doubled.

Global average revenue per user rose 36% to $6.18, with US ARPU up 51% to $11.85. Gross margin expanded 50 basis points to 91.3% as hosting efficiency offset higher AI inference costs. The company repurchased $235 million of stock, or 1.5 million shares at an average price of $157.57, leaving $760 million on its authorization.

Guidance points to slower growth

For the third quarter, Reddit guided revenue of $860 million to $870 million, implying 47% to 49% growth at the midpoint, and adjusted EBITDA of $385 million to $395 million, a 45% margin. The company lowered its full-year stock-based compensation forecast to the low-to-mid teens as a percentage of revenue from the high teens.

Management said visibility into search referral traffic remains low and that AI overviews have yet to deliver the positive impact of traditional search links. Huffman said the company is exploring new video formats, including "spoken Reddit" for listening to posts, and plans to expand Reddit Max as the primary onboarding for small businesses.

The guidance signals that Reddit expects its advertising engine to keep compounding even as user growth faces external search headwinds. Investors will watch the Q3 earnings call for whether product-driven retention gains can offset further referral volatility and whether data licensing renewals with Google and OpenAI, which Huffman called "not binary," are resolved.

This article is for informational purposes only and does not constitute investment advice.