Online community and discussion platform Reddit (NYSE: RDDT) reported Q1 CY2025 results exceeding the market’s revenue expectations, with sales up 61.5% year on year to $392.4 million. On top of that, next quarter’s revenue guidance ($420 million at the midpoint) was surprisingly good and 6.6% above what analysts were expecting. Its GAAP profit of $0.13 per share was significantly above analysts’ consensus estimates.
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Reddit (RDDT) Q1 CY2025 Highlights:
- Revenue: $392.4 million vs analyst estimates of $369.5 million (61.5% year-on-year growth, 6.2% beat)
- EPS (GAAP): $0.13 vs analyst estimates of $0.01 (significant beat)
- Adjusted EBITDA: $115.3 million vs analyst estimates of $88.79 million (29.4% margin, 29.8% beat)
- Revenue Guidance for Q2 CY2025 is $420 million at the midpoint, above analyst estimates of $394 million
- EBITDA guidance for Q2 CY2025 is $120 million at the midpoint, above analyst estimates of $106.6 million
- Operating Margin: 1%, up from -243% in the same quarter last year
- Free Cash Flow Margin: 32.3%, up from 20.8% in the previous quarter
- Domestic Daily Active Visitors: 50.1 million, up 8.6 million year on year
- Market Capitalization: $21.09 billion
“Over 400 million people now come to Reddit each week—because when you want real opinions, you turn to real people,” said Steve Huffman, Co-Founder and CEO of Reddit.
Company Overview
Founded in 2005 by two University of Virginia roommates, Reddit (NYSE: RDDT) facilitates user-generated content across niche communities (called subreddits) that discuss anything from stocks to dating and memes.
Sales Growth
A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Reddit grew its sales at an incredible 38% compounded annual growth rate. Its growth surpassed the average consumer internet company and shows its offerings resonate with customers, a great starting point for our analysis.
This quarter, Reddit reported magnificent year-on-year revenue growth of 61.5%, and its $392.4 million of revenue beat Wall Street’s estimates by 6.2%. Company management is currently guiding for a 49.4% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 29.6% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and suggests the market sees success for its products and services.
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Domestic Daily Active Visitors
User Growth
As a social network, Reddit generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.
Over the last two years, Reddit’s domestic daily active visitors, a key performance metric for the company, increased by 33.5% annually to 50.1 million in the latest quarter. This growth rate is among the fastest of any consumer internet business and indicates its offerings have significant traction. 
In Q1, Reddit added 8.6 million domestic daily active visitors, leading to 20.7% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Reddit’s audience and its ad-targeting capabilities.
Reddit’s ARPU fell over the last two years, averaging 3.5% annual declines. This isn’t great, but the increase in domestic daily active visitors is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Reddit tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace. 
This quarter, Reddit’s ARPU clocked in at $6.27. It grew by 7.1% year on year, slower than its user growth.
Key Takeaways from Reddit’s Q1 Results
We were impressed by Reddit’s optimistic EBITDA guidance for next quarter, which blew past analysts’ expectations. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. On the other hand, its number of domestic daily active visitors was in line. Zooming out, we think this was a solid print. The stock traded up 18% to $140.01 immediately after reporting.
Reddit had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
