Reddit reported 25Q3 earning today. (Shareholder letter)
- Revenue was $584.9 million (VS upper end of guidance $545M, 7.32% beat), 67.9% YoY
- From a segmental view, advertising revenue of $549 million grew 74% year-over-year, and Other revenue was $36 million, up 7% year-over-year
- Adjusted EBITDA was $236 million (VS upper end of guidance $195M, 21% beat), 40% margin
- GAAP net income was $163 million, 28% margin.
- Global DAU was $116 million, 19% YoY.
- US DAU 7% YoY, RoW DAU: 31% YoY
- ARPU was $5.04, 40.8% YoY from $3.58
- US ARPU $5.88 → $9.04 (54% YoY), RoW ARPU: $1.32 → $1.84 (39% YoY)
- Guidance for Q4: $655M-$665M revenue, $275M-$285M Adjusted EBITDA. (about 42% margin) With a similar 7% beat on the upper bound, the revenue will come as $711.6M, 66.4% YoY.
Overall, the company delivered solid results in my opinion. And if we zoom out to look at the recent quarters together, they’ve been on a very good trend.
- Revenue growth YOY: 68% → 71% → 61% → 78% → 68%
- Adjusted EBITDA margin: 27.0% → 36.1% → 29.4% → 33.4% → 40.3%
- GAAP net margine: 8.6% → 16.6% → 6.7% → 17.9% → 27.8%
Lowlights:
- US DAU only grew 7% YoY.
- Non-ads revenue only grew 7% YoY.
Despite these lowlights, I remain bullish as the ads business is firing on all cylinders. With the rapidly improving margins and the growth momentum on the topline, I believe a 2026 forward GAAP PE of 40~50 would be a very conservative expectation. Assuming the exit topline growth of 2026 is at least 40% given the very early stage of their monetization, then I think $RDDT is significantly undervalued.
Long $RDDT (my 2nd largest position after I added before earning)
Luffy