To The Moon

Reddit Q3 Review: Record-High Net Profit Margin, Rivals Meta; International Users Up 30% YoY

This quarter, Reddit's revenue jumped 68% year over year, and margins looked like a well-oiled ad machine: net margin 28% and adjusted net margin 40%. Whether the stock can keep pushing higher now hinges on two things: can international replicate the U.S. playbook, and can those profitability levels hold.

Q3 Key Financial Highlights

Revenue was $584.9 million, up 68%; ad revenue $549 million (+74%); other revenue $36 million (+7%).

Gross margin 91.0%; GAAP net income $162.7 million (net margin 28%); adjusted EBITDA $236.0 million (40% margin). For comparison, the social media giant Meta's normalized net margin has hovered in the 30–40% range over the past several years.

Cash flow and balance sheet. Operating cash flow was $185.2 million; free cash flow $183.1 million. CapEx $2.1 million (0.4% of revenue). Cash, cash equivalents, and marketable securities ended the quarter at $2.23 billion—a strong cushion for continued product and go-to-market investment.

User scale is climbing, too. DAUq averaged 116 million (+19% YoY); WAUq 444 million (+21%). The mix matters: U.S. DAUq grew 7%, while international DAUq rose 31%, underscoring that the incremental growth engine is overseas.

ARPU reached $5.04, up 41% YoY, showing Reddit is not only adding more users—especially abroad—but also convincing advertisers those users convert.

Three Things to Watch

First, the ad engine looks strong: both impressions and pricing rose, driving +74% ad revenue, and more than half of the top-15 verticals grew over 50%, suggesting broad-based demand and a healthier full-funnel.

Second, international expansion and search are advancing in tandem: machine translation now spans 30 languages to feed the upper funnel abroad, while “Reddit Answers” integrated with search improves discoverability and aligns with its “information starting point” positioning .

Third, margin climb and cash generation: Reddit is GAAP-profitable with 40% adjusted EBITDA margin and ~32% operating-cash-flow-to-revenue, and its asset-light model points to solid operating leverage.

Risks

International ARPU is still low ($1.84 vs. U.S. $9.04), so monetization gains will depend on sustained localization of both product and ad stack.

Advertising remains cyclical: outsized growth rides on macro ad budgets and competitive dynamics across platforms; investors should watch how momentum carries beyond the holiday quarter given the company's prudent Q4 outlook.

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