Advertising revenue surges as profitability improves, while slowing U.S. user growth overshadows impressive financial results
Reddit (RDDT) delivered another impressive earnings report, extending its streak of rapid revenue growth as advertising demand and international expansion continued to fuel the social media platform. However, despite outperforming Wall Street expectations across nearly every major financial metric, investors focused on slowing U.S. user growth, sending the stock sharply lower in after-hours trading.
For the second quarter, Reddit reported revenue of $805 million, a 61% year-over-year increase, comfortably exceeding analyst estimates of approximately $730 million. Net income climbed to $253 million, or $1.25 per share, well above expectations of $0.95 per share. Advertising revenue remained the company’s primary growth engine, rising 64% as brands increased spending on Reddit’s expanding advertising platform.
The company also reported 130.3 million daily active users, up 18% from a year ago. While international users grew an impressive 28%, U.S. daily active user growth slowed to 6%, raising concerns that changes in search engine traffic and increased competition from AI-powered search experiences could limit future engagement. Management acknowledged that search referral traffic has become more volatile but emphasized that improvements to Reddit’s products are helping convert visitors into long-term users.
Looking ahead, Reddit projected third-quarter revenue between $860 million and $870 million, comfortably above Wall Street expectations, with adjusted EBITDA forecast between $385 million and $395 million. Management also highlighted continued momentum among international advertisers and small- and medium-sized businesses while expanding AI-powered advertising tools that improve campaign targeting and content creation.
Although the market reacted negatively to slowing domestic user growth, Reddit’s accelerating revenue, rising profitability, and strong guidance suggest the company remains one of the fastest-growing digital advertising platforms as it continues to monetize its highly engaged online communities.
