Reddit Q1 Earnings Call Highlights

Key Points

• Strong quarter and profitability: Revenue rose 69% YoY to $663 million while Reddit reported GAAP net income of $204 million ($1.01 EPS), a 40% adjusted EBITDA margin and a 47% free cash flow margin, ending Q1 with $2.8 billion in cash and investments.
• Advertising momentum and product traction: Ad revenue jumped 74% to $625 million as active advertisers increased >75% YoY, with new products like Reddit Max (beta) delivering ~17% lower cost-per-action and ~25% more conversions and Dynamic Product Ads showing +90% ROAS YoY on average.
• User-growth focus and outlook: Management is prioritizing DAU (targeting ~100M U.S. daily users from ~50M) via onboarding, feed/ML, speed and passkeys, and guided Q2 revenue of $715M–$725M with adjusted EBITDA of $285M–$295M.

Reddit NYSE: RDDT opened 2026 with what executives repeatedly characterized as a standout quarter, highlighting rapid revenue growth alongside expanding profitability and cash generation. Management pointed to continued momentum in advertising, early traction from new performance products like Reddit Max, and ongoing product investments aimed at increasing daily usage—particularly in the U.S.

Financial results: revenue up 69%, profitability milestones

COO Jen Wong said total revenue rose 69% year-over-year to $663 million in the first quarter, driven primarily by advertising. Advertising revenue increased 74% to $625 million, which Wong described as broad-based strength “across the business.” CFO Drew Vollero added that this was Reddit’s “seventh consecutive quarter” of revenue growth above 60%.

Vollero also highlighted profitability gains and cash generation. He said Reddit posted GAAP net income of $204 million, or $1.01 per diluted share, calling it a milestone as GAAP EPS “reached triple digits in Q1 at $1.01 a share.” On a non-GAAP basis, he said adjusted EBITDA margin was 40%, up nearly 1,100 basis points year-over-year. He also cited a 47% free cash flow margin as evidence of “superior cash flow generation.”

On the cost structure, Vollero said gross margin was 91.5%, the company’s seventh consecutive quarter above 90%. Cost of revenue rose to $56 million, up 52% year-over-year, which he attributed to higher volumes in users and ads served, increased machine learning usage, and international investments in speed and reliability. Adjusted operating expenses were $341 million, or about 51% of revenue, down from 61% a year earlier as the company gained operating leverage.

Vollero said capital expenditures were $1 million (0.2% of revenue), underscoring what CEO Steve Huffman called Reddit’s “capital-light model.” Reddit ended Q1 with $2.8 billion in cash and investments, according to Vollero.

Advertising strength and product roadmap: Max, DPAs, and partner ecosystem

Wong said Q1 ad growth was driven by both impressions and pricing, reflecting platform scale and improvements to Reddit’s ad stack. She said conversion-driven, lower-funnel revenue grew “triple digits” year-over-year, and performance-oriented revenue represented more than 60% of total ad revenue. Wong also noted strength across top verticals including retail, CPG, tech, and media and entertainment, while active advertisers grew more than 75% year-over-year.

Wong outlined three focus areas for the advertising roadmap:

• Scaling automation via Reddit Max
• Delivering advertiser value across objectives (upper and lower funnel)
• Expanding the Reddit for business ecosystem through partners

On automation, Wong said Reddit Max launched to beta in early Q1 and is showing “strong adoption and performance outcomes.” She said advertisers running Max campaigns are seeing, on average, a 17% reduction in cost per action and 25% more conversion outcomes, and that about half of Max advertisers are using AI-powered creative features. In the Q&A, Wong said there are “thousands of advertisers on Max already,” but described adoption as early given the product was launched in January. She said the company is now moving from converting existing customers to onboarding new customers directly into Max and is working to put Max in the API for partner access.

On shopping ads, Wong said Reddit’s Dynamic Product Ads (DPA) saw recent investments drive more than 90% higher ROAS year-over-year on average. She cited Liquid I.V. as an example, saying DPAs outperformed the company’s other conversion campaigns by 40%. In response to analyst questions, Wong noted DPA adoption remains early and described significant headroom to improve models and onboarding, adding that there are “still thousands of advertisers that can adopt DPA that haven’t adopted yet.” She said partnerships with Shopify and WooCommerce could help bring more mid-market and SMB advertisers into DPA, and suggested longer-term expansion beyond retail catalogs to categories like travel and auto.

On partnerships, Wong said Reddit announced an integration with Shopify at Shoptalk in March, calling the integration early but “in the process of ramping.” She also referenced third-party measurement, citing a Fospha retail commerce study that found Reddit improved cost per purchase by 34% while increasing ROAS and helping advertisers scale spend by 2.5 times year-over-year.

User growth priorities: DAU focus, onboarding, feed, search, and speed

While Reddit emphasized monetization gains, Huffman repeatedly stressed that daily active users remain central. In response to investor questions about DAU, Huffman said, “DAU is the primary focus of the company because revenue is doing very, very well.” He emphasized a U.S.-specific goal: growing from about 50 million daily U.S. users to 100 million, noting Reddit already reaches 200 million weekly users in the U.S.

Huffman and Wong described several areas of product focus intended to increase frequency and retention:

• Onboarding improvements: Huffman said the company ran experiments that performed well and were ramped to 100%, contributing to progress during the quarter.
• Feed and machine learning: Huffman said “the biggest driver long term will be the feed,” and described ML work as spanning “pretty much the entire stack,” including collecting more signals, adjusting weighting, and updating models faster.
• Performance and speed: Huffman said “pure speed” on iOS and Android could be one of the biggest drivers over the next several quarters.
• Search: Huffman said search is a driver of retention and DAU, noting search WAUQs were up 30% year-over-year. He also discussed continued development of “Reddit Answers,” including deeper integration, more “agentic behavior,” comparison queries, and plans to integrate product catalog links.
• Machine translation: Huffman said machine translation has carried “most of the weight” in recent quarters and that Reddit is translated into 30 languages today.

On engagement measurement, Huffman said the company focuses heavily on new user retention (returning after 7, 30, and 90 days) and frequency (days per week on Reddit). He said the user distribution shows many people visiting one day per week and many visiting seven days per week, and framed the opportunity as converting more users from one-day-per-week behavior to daily usage.

Integrity and identity: bot labeling, verification, and passkeys

Huffman also addressed efforts to improve transparency and defend against unauthorized bot activity. He described “good bots” used by moderators and said Reddit is moving them to its developer platform so they can be labeled more transparently, while also tightening defenses against unauthorized bot usage.

On verification and login, Huffman said Reddit is working on passkeys—describing them as including technologies like Face ID, Touch ID, and YubiKey—and positioned them as both easier and more secure for users. He said passkeys could also serve as a lightweight approach to “human verification,” adding that the work ties together transparency, bot defenses, and growing logged-in usage.

Outlook: Q2 revenue $715M-$725M; adjusted EBITDA $285M-$295M

For the second quarter of 2026, Vollero guided revenue to a range of $715 million to $725 million, implying 43% to 45% year-over-year growth. He said the outlook reflects momentum exiting Q1 but also accounts for “lapping of a particularly strong growth period” in Q2 2025, when total revenue grew 78% and ad revenue grew 84%.

Vollero guided Q2 adjusted EBITDA to $285 million to $295 million, representing approximately 71% to 77% year-over-year growth, with an adjusted EBITDA margin of about 40% at the midpoint. He said the guide assumes total adjusted costs of $430 million, implying about 29% year-over-year growth, which he said is lower than prior quarters as the company begins to lap sales and marketing investments that started in Q2 2025.

Vollero also noted that Q2 2026 will be the final quarter Reddit discloses logged-in and logged-out DAUQ metrics; starting in Q3 2026, the company will continue reporting U.S. and international DAUQ and WAUQ as it has historically.

In the Q&A, executives said they have not seen anything “acute” in ad demand by vertical despite a volatile macro backdrop, though Wong said some partners are planning on shorter, month-to-month cycles with less visibility. Huffman also said Reddit maintains “important partnerships” with Google and OpenAI, calling them meaningful and mutual, while adding, “Nothing new to share on those specific relationships at this time.”

About Reddit NYSE: RDDT

Reddit is an online social news aggregation, discussion and content-sharing platform organized around user-created communities called "subreddits," each focused on a particular topic or interest. Registered users submit links, text posts, images and video, and community members vote and comment to surface popular content. The site is accessed via its web platform and mobile apps for iOS and Android, and it supports live events such as Ask Me Anything (AMA) sessions and community-driven discussions.

Founded in 2005 by Steve Huffman and Alexis Ohanian, Reddit is headquartered in San Francisco and serves a global audience with particularly large user bases in the United States and other English-speaking markets.

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