Release Date: July 30, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reddit Inc RDDT delivered its eighth consecutive quarter of over 60% revenue growth, with total revenue up 61% year-over-year to $805 million.
- Adjusted EBITDA margin reached 43%, and the company crossed a major milestone of $1 million revenue per employee.
- Advertising revenue grew 64% year-over-year, driven by strong adoption of Reddit Max, which saw over 60% growth in advertiser count and 50% revenue growth quarter-over-quarter.
- New app user retention improved 50% year-over-year, indicating better product quality and user engagement.
- Operating cash flow doubled year-over-year to $262 million, and the company crossed $1 billion in operating cash flow on a trailing twelve-month basis.
- The company repurchased $235 million worth of stock, demonstrating confidence in its long-term growth and capital allocation strategy.
Negative Points
- Search referral traffic was choppy and volatile, particularly later in the quarter, creating headwinds for user growth.
- US daily active users declined sequentially, raising concerns about user growth despite product investments.
- Paid marketing spend showed mixed results, with user acquisition spending needing stronger attention to improve returns.
- The company faces uncertainty in data licensing renewals with partners like Google and OpenAI, with no clear timeline for resolution.
- The company will stop reporting logged-in and logged-out user metrics starting Q3 2026, reducing transparency for investors.
- Stock-based compensation is expected to elevate in Q3, potentially impacting profitability.
Q & A Highlights
Q: What drove the strength in the ads business this quarter, and how is Reddit addressing user growth trends and driving high-quality users to the platform?
A: Jen Wong (COO) attributed the ad strength to consistent messaging around Reddit's influence on consumer journeys, delivering market-competitive outcomes, and strong adoption of self-serve tools, which drove active advertiser growth of over 70% year-over-year. Steve Huffman (CEO) emphasized that the goal of 1 billion daily users globally and 100 million in the US remains unchanged. He noted that while product work added DAUs in the quarter, it was offset by a decline in search referrals. Key progress includes a 50% year-over-year improvement in new app user retention, growing weekly reach to over 0.5 billion, and successfully converting more web users to the app, where they are more engaged.
Q: Can you provide more context on the headwinds in search referrals late in the quarter, and what is the outlook for data licensing renewals?
A: Steve Huffman (CEO) explained that the search ecosystem continues to evolve, with volatility in referral traffic, including a decline in machine-translated content. He noted that while 10 blue links have driven value, AI overviews have yet to make a similar positive impact, and visibility remains low. On data licensing, Huffman stated there is no change in strategy, and Reddit's content is in high demand for training, post-training, and browsing. He emphasized that these deals are multifaceted and not binary, with the goal of maximizing value for Reddit across all touchpoints, including Google and OpenAI relationships.
Q: Despite investments, US daily active users were down sequentially. What gives you confidence in reaching the 100 million US DAU goal, and is there a scenario where you don't renew licensing deals with Google and OpenAI?
A: Steve Huffman (CEO) expressed confidence because product work is showing results, such as the significant improvement in new app user retention. He stated that search is external and volatile, but direct user growth is in Reddit's control. On licensing, Huffman said the range of outcomes is wide, and every aspect of the relationships, including training, blue links, and AI overviews, will be evaluated independently to maximize value. He stressed that Reddit aims to bring users into its ecosystem, not just rely on clicks.
Q: How should we think about the headroom for ad load, auction density, and advertiser ROI in the US, and how are you evaluating returns on marketing spend?
A: Jen Wong (COO) stated there is still significant headroom, driven by outcomes across the funnel, such as the 6-second guaranteed video view product and growing conversion volumes. She emphasized the strategy of making every impression more valuable. Drew Vollero (CFO) explained that marketing spend is evaluated using a straightforward cash model based on user acquisition cost, retention, and monetization over a short timeframe. He noted that while the ROI is attractive, better user retention is the key unlocker to increasing spend.
Q: Can you unpack the success with SMBs, particularly with Shopify and Reddit Max, and what is the strategy for the creator ecosystem to reach scale?
A: Jen Wong (COO) highlighted that SMB is a growing segment with thousands of global SMBs not yet on the platform. Shopify integration is now generally available, enabling catalog syncing and automated campaigns, with plans for joint marketing efforts. Reddit Max is being positioned as the primary onboarding experience for SMBs to reduce friction. Steve Huffman (CEO) noted that Reddit's creator ecosystem differs from other platforms, focusing on "everybody else" rather than the top 1% of creators. Efforts include a new post composer, better community recommendations, and using LLM assistance to improve post success rates for new users.
Q: Given the high ARPU, why not spend more on marketing, and where are the largest remaining opportunities for operating leverage?
A: Drew Vollero (CFO) said marketing is important for reaching the North Star goals, but the key unlocker is better user retention, which is improving. He noted the launch of the "People Are the Best" brand campaign and a balance between user acquisition and brand spending. On margins, Vollero stated incremental margins have been in the high 50s to low 60s, and the long-term goal remains a 50% adjusted EBITDA margin. He emphasized that leverage will come from incremental revenues rather than cutting costs, with investments focused on ad tech, sales, and machine learning talent.
Q: How do you view the importance of high-quality direct users versus search referral traffic, and can you elaborate on the mix shift?
A: Steve Huffman (CEO) confirmed that direct and app users are worth multiples more than search referrals. He stated that Reddit is not building for drive-by traffic but for direct usage, which is where the business lives. Despite search volatility, revenue growth has been strong and consistent because the business relies on direct repeat users. He highlighted progress in conversion and retention efforts, which are within the company's control.
Q: Can you provide an update on engagement trends within Reddit search and the timeline for launching a generally available advertising offering on that surface?
A: Steve Huffman (CEO) noted steady progress on Reddit Answers, with the search bar now universal in the app. He believes Reddit is now the best platform for searching Reddit for many queries. Jen Wong (COO) added that search is a space for shopping experiences, with plans to enrich the search page with rich media and product visual catalogs. She mentioned that shopping listing ads, which feature multiple retailers, are a great fit for search pages, and the company has the infrastructure to launch ads there, though they are still tracking user adoption.
Q: What specifically drove the 50% year-over-year improvement in new app user retention, and what are the key areas of focus for feed model improvements?
A: Steve Huffman (CEO) attributed the retention improvement to better conversion of web users to app users, improved onboarding, and fixes in areas like login and account recovery. On feed models, he acknowledged that Reddit's models are smaller and slower than state-of-the-art, with only about 10% of user activity incorporated. He outlined significant headroom in candidate selection, model size, model speed, and signals, noting that the candidate set is limited to a week, while much of Reddit's content is timeless. He expects improvements across these dimensions over the next year.
Q: How do
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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