Reddit’s Q4 Surge: 70% Revenue Growth and a $1 Billion Buyback

Date of Call: Feb 5, 2026

Financials Results

• Revenue: Q4: $726 million, up 70% YOY; Full Year: $2.2 billion, up 69% YOY
• EPS: Q4: $1.24 per diluted share, up more than 3x 2024; Full Year: $2.62, up from a loss last year
• Gross Margin: Q4: 90% (implied from 91.2% full year, up 70 bps); Full Year: 91.2%, up 70 basis points
• Operating Margin: Not explicitly provided; Adjusted EBITDA margin: Q4: 45% (implied from $327M on $726M revenue); Full Year: 38%

Guidance:

• Q1 2026 revenue expected in the range of $595M to $605M, representing 52% to 54% YOY growth.
• Q1 adjusted EBITDA expected in the range of $210M to $220M, representing approximately 82% to 91% YOY growth, with a margin of 36% at the midpoint.
• Total adjusted cost base in Q1 expected to be $385M, down sequentially from Q4.
• For full year 2026, stock-based compensation (SBC) expected to be in the high teens as a percentage of revenue.
• Targeting dilution at the lower end of the medium-term guide of 1% to 3%.

Business Commentary:

Revenue and User Growth:

• Reddit, Inc. reported revenue of $726 million for Q4, up 70% year-over-year, contributing to a full-year revenue of $2.2 billion, a 69% increase.
• The company's daily active users (DAU) reached 121 million, an 19% year-over-year increase, and weekly active users (WAU) rose to 471 million, a 24% increase.
• This growth was driven by foundational work in scaling the business and improvements in the unique community model, attracting more users to the platform.

Advertising Business Expansion:

• The advertising business grew 75% year-over-year to $690 million in Q4, with performance ads and lower funnel objectives seeing significant growth.
• Improvements in machine learning and new ad formats like shopping ads contributed to this expansion.
• The broad-based strength across objectives, channels, verticals, and regions, including a doubling of SMB revenue, fueled overall advertising growth.

Profitability and Financial Health:

• Reddit achieved a net income of $252 million, representing 35% of revenue, and adjusted EBITDA of $327 million, or 45% of revenue, in Q4.
• The company's free cash flow exceeded $264 million, marking a significant milestone.
• This financial success was attributed to consistent revenue growth, strong operational performance, and effective cost management.

Product and User Engagement Initiatives:

• Reddit's search volume increased significantly, with over 80 million people searching on the platform weekly, up from 60 million a year ago.
• The introduction of Reddit Answers and improvements in search interfaces are enhancing user engagement.
• Efforts to streamline user onboarding and improve feed relevancy using AI are aimed at fostering deeper user engagement and retention.

Strategic Investments and Share Repurchase:

• Reddit announced a $1 billion share repurchase program, reflecting its commitment to delivering value to shareholders.
• The company plans to prioritize investments in its core business, pursue M&A opportunities, and opportunistically repurchase shares.
• This strategic capital deployment is supported by strong cash generation and a robust financial position.

Sentiment Analysis:

Overall Tone: Positive

• Management described 2025 as a 'breakout year' and a 'strong quarter,' citing revenue growth of 70% YOY in Q4 and 69% for the full year. They highlighted 'differentiated growth,' 'strong commercial momentum,' and the launch of a $1 billion share repurchase program, stating 'we have the right team, the right road map and the right moment.'

Q&A:

• Question from Ronald Josey (Citigroup Inc., Research Division): Could you talk about early benefits on revamped onboarding around retention and the impact of integrating search with Answers on user experience? Also, how will Reddit Max roll out and affect channel mix?
  Response: Onboarding experiments in Q4 showed that streamlining improves retention, with a focus on using LLMs to enhance user interest triangulation. Search integration drove significant growth, with Answers queries up from 1 million to 15 million over the last year. Reddit Max is currently converting existing lower-funnel advertisers, with new advertiser onboarding to follow, expected to reduce friction and drive performance gains.

• Question from Benjamin Black (Deutsche Bank AG, Research Division): Thoughts on AI-generated content on Reddit and its potential additivity? How is Reddit positioned for agent e-commerce, and what is the impact on users, contribution rates, and ads?
  Response: AI-generated content is seen as potentially additive if transparent and labeled, with a focus on human-AI interaction. Reddit is well-positioned for agentic commerce as it provides trusted recommendations, with marketing value coming from human decision-making and resource allocation.

• Question from Thomas Champion (Piper Sandler & Co., Research Division): Does removing the logged-in vs. logged-out user reporting distinction imply monetization can reach parity between them, and what are the mechanisms?
  Response: Logged-in and logged-out users see ads of equal value; the distinction is blurring as the strategy is to increase engagement (e.g., turning weekly users into daily) through better personalization, not requiring login for value.

• Question from Justin Post (BofA Securities, Research Division): How are the AI deals with Google and OpenAI progressing, and what is the importance of their data? Any user impact or revenue opportunities around bot verification?
  Response: Partnerships with Google and OpenAI are shifting to product collaborations, with Reddit aiming to bring users into community experiences. Bot verification is focused on labeling and transparency to preserve human interaction, with no user impact noted.

• Question from John Colantuoni (Jefferies LLC, Research Division): How has Reddit Answers/Search impacted monetization, and what drove pricing in Q4? Will pricing contribution grow?
  Response: Answers and Search are incremental and additive to engagement, representing a future monetization opportunity. Pricing growth is driven by delivering more marketing outcomes per impression, with competition based on ROAS and measurement capabilities.

• Question from Richard Greenfield (LightShed Partners, LLC): How will you make search more visually focused on the homepage, especially on the app? What do you want the citation feature from AI partners to look like?
  Response: Testing larger search bars on the homepage to improve visibility. For citations, the goal is to drive users to Reddit communities for deeper conversation, differentiating Reddit as a source for human insights.

• Question from Vasily Karasyov (Cannonball Research, LLC): Given new ad solutions, should performance outgrow brand again in 2026, or are there brand-side solutions to offset?
  Response: Reddit is a full-funnel solution; brand investment will continue in 2026 with focus on unique interactive ads, video optimization, auto-bidding, and measurement to demonstrate brand value.

• Question from Jason Helfstein (Oppenheimer & Co. Inc., Research Division): What is the progress on hiring and training to meet advertiser demand, and how long to catch up?
  Response: Continuous investment in sales force and productivity tools, with high ROI. The team manages multiple priorities (e.g., CAPI adoption) while supporting growth, with decisions driven by customer digestion and product roadmaps.

• Question from Josh Beck (Raymond James & Associates, Inc., Research Division): What is the headroom with large advertisers and wallet share? Any Q1 outlook considerations aside from tariffs?
  Response: Opportunity exists with large advertisers for deeper penetration globally, across their brand portfolios, and moving from top to lower funnel. The Q1 guide is similar to recent quarters, reflecting momentum from Q4 and typical March seasonality.

• Question from Naved Khan (B. Riley Securities, Inc., Research Division): What is the ROI on user marketing spend and thoughts on scaling? What kind of M&A (including scaled) is being considered?
  Response: User marketing ROI is evaluated through cost per user and retention, with high gross margins aiding payback. M&A focus includes tuck-in acquisitions of capabilities and technologies, particularly in ad tech, with scaled opportunities on the table.

• Question from Andrew Boone (Citizens JMP Securities, LLC, Research Division): What is needed to grow shopping ads faster? What is the experience you're building for generative AI seekers on Reddit?
  Response: For shopping ads, improvements in ML signals and product feed adoption are needed to increase competitiveness. For AI seekers, the focus is on unifying search experiences, with LLM-powered Answers excelling at queries seeking multiple perspectives, driving significant WAU growth.

• Question from Colin Sebastian (Robert W. Baird & Co. Incorporated, Research Division): Does the gateway role for LLMs create a pathway for more brands to experiment with ads? How to shift perception of Reddit from niche to full-funnel?
  Response: Brands are increasingly recognizing Reddit's value for organic presence in LLMs, which can lead to paid advertising. Perception shift involves highlighting scale through community insights and tools, educating on audience size, and connecting insights to marketing platform volumes.

Contradiction Point 1

Onboarding Experience and User Growth Strategy

Shift from testing new onboarding flows to declaring existing ones as sufficient.

How are the revamped onboarding improvements, search-Answers integration, and Reddit Max's rollout impacting retention, user experience, and channel mix? - Ronald Josey (Citigroup Inc.)

2025Q4: Onboarding experiments in Q4 showed that streamlining improves retention... - Steven Huffman(CEO)

Are the onboarding flows nearing GA, and what lessons have been learned so far? - Josh Beck (Raymond James & Associates, Inc.)

20251031-2025 Q3: A redesigned onboarding flow is being prepared for testing and potential rollout... as it is considered one of the biggest levers for growth. - Steven Huffman(CEO)

Contradiction Point 2

Monetization Timeline for Answers and Search

Shift from Answers being non-monetized but additive to being a future opportunity to it being a future monetizable feature with integration driving growth.

How have Answers and Search impacted monetization, and what role has pricing played in revenue growth and future projections? - John Colantuoni (Jefferies LLC)

2025Q4: Answers and Search are not yet monetized but are additive to engagement, representing a future opportunity. - Jennifer Wong(CRO)

Could you discuss user growth trends in Q4 and beyond, and engagement trends for Answers with 75 million WAUs? - Ronald Josey (Citi)

20251031-2025 Q3: The integration [of Answers with search] is progressing well. The goal is to build a global, unified search experience... The feature has been expanded to non-English languages... Search is a priority for improving new user onboarding and retention. - Steven Huffman(CEO)

Contradiction Point 3

Status and Impact of AI Chatbot Traffic

Contradiction on whether AI chatbots are a significant traffic driver.

How are AI deals with Google and OpenAI progressing, and is Reddit's data becoming more important? Additionally, what user impact or revenue opportunities exist around bot verification? - Justin Post (BofA Securities)

2025Q4: Bot interactions... must be clearly labeled. This challenge is an evolution of a long-standing issue on Reddit. - Steven Huffman(CEO)

What are the early results from the simplified onboarding flow, and what is the significance and trends of referral traffic from AI chatbots? - Naved Khan (B. Riley Securities, Inc.)

2025Q3: AI chatbots are not a major traffic driver today. - Steven Huffman(CEO)

Contradiction Point 4

Monetization Status and Strategy for Search & Answers

Contradiction on whether Search & Answers features are currently monetized.

How have Answers and Search impacted monetization in the near and long term, and what is pricing's contribution to revenue, both currently and in the future? - John Colantuoni (Jefferies LLC)

2025Q4: Answers and Search are not yet monetized but are additive to engagement... - Jennifer Wong(COO)

What are the user growth trends for Q4 and beyond, especially in diversifying traffic sources, and what are the engagement trends for Reddit Answers, now integrated into search results with 75 million WAUs? - Ronald Josey (Citigroup Inc., Research Division)

2025Q3: The integration is progressing well. The goal is to create a unified, modern search experience... Currently handles about 20% of search volume in the core search box. - Steven Huffman(CEO)

Contradiction Point 5

Strategy for Logged-Out User Monetization

Contradiction on the primary monetization approach for logged-out users.

What monetization opportunities exist for logged-out users, and what mechanisms will drive parity after removing the logged-in/logged-out reporting distinction? - Thomas Champion (Piper Sandler & Co.)

2025Q4: Both logged-in and logged-out users see ads of equal value. The strategy is to increase engagement... without requiring a login for personalization. - Jennifer Wong(CRO)

How do you convert anonymous users to logged-in? - Benjamin Black (Deutsche Bank)

2024Q1: The large daily user base represents a future opportunity... and also a monetization opportunity through targeted ads on post/comment pages. - Steve Huffman(CEO)