Story Stocks^®

Reddit (RDDT) delivered a strong beat-and-raise for Q3, easily exceeding EPS and revenue estimates with net income surging 430% yr/yr to $163 mln. The stock is rallying on robust fundamentals and a confident Q4 revenue guidance above expectations.

• Advertising revenue jumped 74% yr/yr to $549 mln, driven by broad strength across verticals, geographies, and channels, as well as new AI-powered ad tools enhancing campaign performance and efficiency.
• Gross margin expanded 90 bps to 91%, reflecting scaling operating leverage and continued optimization of RDDT's ad stack and platform.
• Daily Active Unique users (DAUq) increased 19% to 116 mln, surpassing expectations, with international users growing strongly to 64.4 mln. U.S. logged-in DAUq grew 7% to 23.1 mln, though this marks a continuing slowdown in U.S. user growth.
• RDDT continued advancing its AI offerings, including Reddit Answers, a chatbot-like feature integrated into search delivering community-powered, contextual responses. AI-driven ad automation tools also contributed to stronger advertiser outcomes and drove adoption of complex ad formats.
• For Q4, RDDT guided revenue to $655-$665 mln, beating consensus, with adjusted EBITDA of $275-$285 mln. Growth is expected to be fueled by continued user engagement growth, international expansion, product enhancements, and AI-driven monetization tools.

Briefing.com Analyst Insight:

RDDT's Q3 results demonstrate its strong position as a leader in online communities and digital advertising, with accelerating monetization driven by innovative AI tools and differentiated ad products. The 74% surge in advertising revenue reflects increasing advertiser confidence in RDDT’s unique audience and precise targeting capabilities enhanced by AI. International user growth and product improvements support sustained engagement, while slowing U.S. logged-in user growth continues to warrant attention. The company’s expansion in gross margin and achievement of a 40% adjusted EBITDA margin signal significant financial maturity. AI initiatives like Reddit Answers are pivotal in improving user experience and ad performance, helping RDDT differentiate itself amid competitive pressures. Overall, RDDT is executing well on growth, profitability, and technological innovation, positioning itself strongly for continued momentum in Q4 and into 2026.