Reddit rides search and globalization efforts to blow past revenue and earnings expectations

By James Rogers

The results are Reddit's seventh since its IPO and indicate that the growth seen in recent quarters is continuing apace

Reddit reported third-quarter results after market close on Thursday.

Growth around its search offerings and globalization efforts helped Reddit Inc. blow past Wall Street's expectations for its third-quarter earnings Thursday.

The results are Reddit's (RDDT) seventh since its initial public offering in March 2024, and indicate that the growth seen in recent quarters is continuing apace. The social-media platform's revenue rose 68% year over year to $585 million, easily beating the FactSet consensus analyst estimate of $549 million, while advertising revenue increased 74% to $549 million.

The company reported net income of $163 million, or 80 cents a share, up from $30 million, or 16 cents a share, in the prior year's quarter. Analysts surveyed by FactSet were expecting earnings of 52 cents a share. Reddit's net income was 28% of revenue.

The company's quarterly profit was its fifth on a GAAP basis since it went public. Gross margin was 91%, up from 90.1% in the same period last year.

Reddit shares surged 10.2% in extended trading, after ending Thursday's session down 7.8%.

Search is looming large for the San Francisco-based company, which has been ramping up its search capabilities. In a letter to shareholders, Chief Executive Steve Huffman said that Reddit's core search product now has over 75 million weekly users, up from 70 million in the second quarter.

The CEO said the company is also integrating Reddit Answers, an AI-powered feature designed to make it easier for users to find what they are looking for, into core search. This, he said, will increase its visibility across conversations, and is also being rolled out to non-English languages.

Reddit Chief Financial Officer Drew Vollero highlighted improvements to both the platform's search answers and its output. If a user, say, misspells something, Reddit search is better able to understand the user's intent, he told MarketWatch. The search capability is also better at recommending information to users, he added.

In his letter to shareholders, Huffman also pointed to Reddit's accelerating international growth - noting that Machine Translation, or translating content for global audiences, has been extended to 30 languages, up from 23 last quarter.

"AI is helping us to translate our English corpus of information into new languages," CFO Vollero told MarketWatch. New languages added in the quarter include Japanese, Polish and Turkish, he said.

International daily active users grew 31% to 64.4 million, while U.S. daily active users grew 7% to 51.6 million.

The platform's daily active users rose 19% on a year-over-year basis to 116 million - topping the FactSet consensus estimate of 113.86 million, and marking the third straight quarter that daily active users have beaten analysts' estimates.

Reddit defines a daily active unique user as one that the company can identify with a unique identifier and who has visited a page on the Reddit website or opened a Reddit application at least once over a 24-hour period.

The company also added a lot of advertisers during the quarter, according to Vollero, both in the U.S. and overseas. "We continue to have success up and down the advertising funnel," he said. AI, the CFO added, is helping Reddit get relevant advertisements in front of people.

On the subject of AI, Vollero described Reddit as "an AI winner without a lot of AI cost," pointing to the company's use of third-party hosting services. "That has really helped us stay profitable," he noted.

This is in stark contrast to the massive AI expenditures at some of America's biggest tech companies. This week, Google parent Alphabet Inc. (GOOG) (GOOGL) said that its AI spending could be between $91 billion and $93 billion this year.

During the quarter, Reddit's capital expenditure was $2.1 million, or 0.4% of revenue.

Speaking during a conference call to discuss the results, Reddit's Chief Operating Officer Jen Wong said that the company's total active advertiser count expanded by over 75% year over year in the third quarter. "We added new accounts across all channels, including large, mid-market and SMB businesses," she said.

For the fourth quarter, the company expects revenue in the range of $655 million to $665 million, well above the FactSet consensus estimate of $638 million.

Reddit shares are up 19% in 2025, compared with the S&P 500 index's SPX gain of 16%.

-James Rogers

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10-30-25 2053ET

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