Reddit Stock

Good afternoon. My name is Jonathan, and I will be your conference operator today. At this time, I would like to welcome everyone to Reddit's Q3 2026 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Jesse Rose, Head of Investor Relations. You may begin your conference.

Thanks, Jonathan. Hi, everyone. Welcome to Reddit's Third Quarter 2026 Earnings Call. Joining me are Steve Huffman, Reddit's Co-Founder and CEO; Jen Wong, Reddit's COO; and Drew Vollero, Reddit's CFO.

I'd like to remind you that our remarks today will include forward-looking statements, and actual results may vary. Information concerning risks and other factors that could cause these results to vary is included in our SEC filings. These forward-looking statements represent our outlook only as of the date of this call, and we undertake no obligation to update any forward-looking statements. During this call, we will discuss both GAAP and non-GAAP financials. Reconciliation of GAAP to non-GAAP financials can be found in our letter to shareholders. Our third quarter letter to shareholders and earnings press release are available on our Investor Relations website and Investor Relations subreddit.

And now I'll turn the call over to Steve.

Thanks, Jesse. Hi, everyone. Thank you for joining us, and welcome to our quarterly earnings call. In Reddit's 21 years, the Internet has changed in ways that would have been impossible to predict. We've gone from flip phones to smartphones to personal AI agents. And through it all, Reddit has always owned our own corner of the Internet, offering people something that no one else does.

Social media has evolved from friends and families to followers and famous people. And from status updates to the mindless scroll. Web search is evolving from a gateway to the web to becoming an AI-powered destination itself. While extraordinarily useful and powerful, AI search solves a different problem than Reddit. AI does not fulfill people's fundamental need for community connection and belonging with other people, and it lacks context and nuance. The Reddit experience captures the human experience in a way that no other platform can replicate. Only Reddit can help people navigate life's journey through the lens of other people's lived experiences.

Only Reddit can help you feel both like a multifaceted, unique individual and a part of a greater whole and do so without needing to reveal your real-world identity. That's why Reddit is and always has been a distinct and direct destination. People seek out Reddit because we meet a universal need, they simply can't get anywhere else online. Our work now is about doubling down on what makes Reddit Reddit and making Reddit more of a daily habit. We come into that work with clear advantages and revenue momentum in the business. And you can see that in the exceptional commercial results we delivered in the third quarter.

We generated 53% revenue growth, something few companies are doing and it's even more significant when you consider that's on top of nearly 70% revenue growth last year. Those results in Q3 helped us cross $3 billion in revenue over the last 12 months. Our margins, which are already industry-leading expanded across the board. Reddit's continued growth at scale is proof of the strength of our business, the demand for our platform and the value we provide advertisers. And it's that consistent delivery of growth and profitability that earned us a place in the S&P 500 index earlier this year -- earlier this quarter, excuse me.

Yes, while our business continues to grow significantly, Internet search and how people discover things online continues to change rapidly and significantly. Our search referral traffic was down meaningfully in Q3 with the decline accelerating later in the quarter. The biggest impact was on logged out and web traffic, but some of the impact flows through to logged in and app traffic since search referral is a common source of reengagement for users. The company helped to offset the declines by both driving reach primarily through user marketing and also by continuing to improve the product. These declines have continued into the early part of Q4.

During October, we have seen that search traffic has dropped by more than 1 million referrals on average per week. If this rate of decline continues, current trends would suggest that total DAUq could fall in Q4 by a low double-digit percentage from our current base of 130 million DAUqs. However, search referral trends do not determine our relevancy and they do not define our future. Logged-in and App DAUq are our most valuable users, and they are our primary focus. And we grew Logged-in and App DAUq sequentially. Together, these make up the vast majority of engagement and over 80% of the monetization on Reddit.

Growing this high-value audience speaks to the strength of Reddit as a destination, and this is what matters for the long-term health of our platform and our business. So as we look ahead, our strategy to make Reddit a direct daily habit for more people is simple: make Reddit awesome, grow community and belonging and bring in new audiences. Making Reddit awesome means making it more relevant and easier to navigate, getting to personalization faster and creating fun new experiences on Reddit. This will both improve retention of new users and deepen engagement of our core users.

Our work in ML feeds and app performance is delivering results. The percentage of new users who returned the first week after installing the Reddit app is up double digits quarter-over-quarter and over 50% year-over-year. Video creation and consumption are both up as are engaged video views. We'll continue our work in these areas in the coming quarters, and I'm particularly excited about some of the areas we'll be testing to make the core feed experience more consistent and predictable and to grow some of our new experiences like games and visual podcasts.

To grow community and belonging, we've been making it easier to create, grow and contribute to communities on Reddit. This quarter, we've continued to grow the number of communities on Reddit and increased the contribution from our users. We added another 1 billion posts and comments to our corpus. Looking forward, our work will be to make subreddits more distinct to deepen the sense of belonging by making joining subreddits more intentional and significant and to make moderation much easier and more consistent by giving moderators AI-powered tools. This approach has helped our own enforcement team reduce the median time to action on violating content from 58 hours to 5 seconds this year.

Our current opportunity is to better retain the large cohort of users who try Reddit for the first time every day by executing on the above. We see a large number of unattributed aka word-of-mouth installs every day. We also have a large number of reinstalls, which we can mitigate through things like an improved incognito mode in the app. And of course, we will continue to convert our still significant number of search referred users from mobile web to app. Currently, only about 13% of eligible mobile web users are seeing the app conversion prompt. So this has room to scale.

While early, so far, we have seen that app users that come to Reddit through marketing retain at rates similar to app users that come organically, so we will continue to invest here. Together, these efforts will help us reach more people and convert more first-time users into regular Reddit users. And a key piece of work to retain new audiences is shifting Reddit to a logged in only experience. It's a big one for us, and it's a big one for me. I want to take a minute to outline why we're making this change.

Moving to primarily logged in will ensure our users have the best Reddit experience possible and can find the content and communities most relevant to them. It's better for our business because we have more signals for ads targeting and being logged in leads to higher engagement generally. It also allows us to protect access to Reddit's extremely valuable corpus of data and helps us better adapt to emerging regulations around the world. In Q4, we'll begin fully testing this in select markets outside the U.S. The results of those tests will inform an optimized version of logged-in only Reddit globally. Pretty much all the major ad platforms have gone through this transition. So we are excited and are moving quickly. With the above work, we will make Reddit a fun, fulfilling direct daily habit for every Internet user.

Thank you. And now over to Jen.

Thank you, Steve. Hello, everyone. Q3 was a strong quarter for Reddit. Revenue grew 53% year-over-year and trailing 12-month revenue crossed $3 billion. This milestone reflects our ability to grow at scale. That growth is happening as the Internet changes quickly. AI is reshaping how people find information and get things done. At the same time, lived experience continues to increase in value as an essential source for advice, and as a knowledge source for AI systems. People turn to other people when they need a second opinion from someone who actually bought insurance for the first time or who has navigated mid-40s fitness and to savor the sense of belonging from people coming together to share fun, hardships and wins.

As synthetic content and automated summaries become more common, Reddit's conversations and communities are an increasingly valuable destination for people and a high intent audience for advertisers. These real experiences and perspectives help people make big and small decisions every day. And that's why half of U.S. shoppers say they come to Reddit to verify AI recommendations. We see significant opportunity ahead for our business, and we're making progress, reflected in strong customer retention, growing share of wallet and more always-on advertiser relationships. These trends give us confidence in Reddit's ability to deliver durable, differentiated growth.

Now moving to our results. In Q3, advertising revenue grew 54% year-over-year to $847 million. Growth came from both pricing and impressions with pricing outpacing impressions as we delivered on our strategy to make every impression more valuable. We saw that translate into results. In Q3, click volume grew over 50% and conversion volume more than tripled year-over-year. We also saw strength across our primary sales channels, including large customers and scale. Scaled revenue grew more than 80% year-over-year in Q3, driven by deeper relationships with existing advertisers, higher average spend and new advertiser acquisition. Mid-market active advertisers grew more than 50% year-over-year, with growth across both North America and EMEA.

In the mid-market channel, our suite of shopping products is contributing to retail advertiser demand, while our B2B offering is driving demand from mid-market service advertisers. Revenue growth was broad-based across verticals and regions. Business and finance, pharma and travel industries were strong, and U.S. ad revenue grew 51% year-over-year, while international ad revenue grew 68% year-over-year. Demand spanned the full funnel led by lower funnel performance revenue, particularly shopping and app installing objectives, which both grew over 95% year-over-year.

Now I'll discuss our progress against the ad stack. Our investments in the ad stack are helping businesses achieve stronger performance and consistent returns. We're executing against 3 areas: scaling automation through our ads platform and Reddit Max campaigns, delivering advertiser value across the full funnel and expanding the Reddit for Business ecosystem. So starting with automation. Reddit Max entered public beta in Q3, and we expanded access and integrated Max into the onboarding experience for new advertisers. Max advertiser adoption more than tripled quarter-over-quarter. We also launched asset groups, which let advertisers manage multiple product lines or creative themes within a single Max campaign.

Improvements in the machine learning models beneath Max and our ad stack are helping us learn faster and improve performance. In Q3, we improved model training, added more real-time sequencing and session signals and updated graph-based signals across our ranking models. These improvements contributed to performance gains across the funnel from stronger view-through rates in the upper funnel to lower cost per action in the lower funnel. Our road map of model improvements delivers consistent performance gains for advertisers into ad spend efficiency and higher returns.

Now moving to our progress across marketing objectives for advertisers on our platform. Reddit users bring high intent to every interaction, where they're engaging with text images or video. In the upper funnel, video views was our fastest-growing objective with revenue more than doubling year-over-year. We broadened our video offerings with a new 15-second engaged video view objective which entered public beta in Q3. And this objective helps advertisers optimize for people more likely to engage with longer-form video. Now in the lower funnel. Shopping was our fastest-growing objective, and we expanded the product to support up to 20 million products, making it easier for larger and more complex advertisers to run shopping campaigns.

People come to Reddit to ask questions, learn more from real experiences and make personal decisions based on the communities they trust. The same is true for people making decisions for their business. More than 20 million business decision makers come to Reddit globally and 9 in 10 use Reddit in the past year to research business products or services. We enhanced our lead generation capabilities to help businesses for high intent engagement into measurable leads. Our in-market audiences targeting tools help B2B advertisers reach people actively researching or considering a purchase including in the enterprise and business AI and cybersecurity industries. B2B advertisers using these audiences saw an average cost per action improvement of about 7% compared to other first-party targeting options. We're also adding audience and measurement partners and testing CRM integrations, helping advertisers connect Reddit campaigns to their sales workflows and assess performance across the funnel.

Next, I'll discuss how we're expanding the Reddit for Business ecosystem. We continue to expand our ecosystem by adding partners and extending our products through existing integrations. In Q3, revenue from our ads API ecosystem grew more than 45% quarter-over-quarter. We added Innovid and Skai to our advertising and customer management partnerships and began a beta integration with HubSpot. We also launched Sprinklr's Max API integration, the first third-party integration for Max campaign management. Our Shopify integration also continued to scale following its general availability launch in May. Using Reddit's DPA product and Shopify integration, backpack and accessories company, Ethnotek connected its catalog to service the most relevant products to high-intent shoppers. The campaigned delivered a 4x return on advertising spend and a 40% more efficient CPA, helping Ethnotek scale while keeping the ads relevant to each user.

On measurement, third-party research validates our impact across verticals and categories. Research from the team found that Reddit audiences generated higher lifetime value across CPG, quick-serve restaurant, QSR and retail categories. Reddit shoppers delivered 17% higher LTV in personal care and beauty, 19% higher value in QSR beverage and snacks and 11% higher value in retail beauty and personal care. A Samba meta-analysis of 25 tune-in campaigns on Reddit ads drove an average 18% incremental lift in tune-in across linear and streaming with exposed households watching 15% more minutes than the competitive benchmark, demonstrating that Reddit drove both more tune-in and deeper viewing.

Lastly, I'll share an update on our consumer marketing efforts. Our marketing strategy is to broaden awareness of Reddit and increase our top of funnel for logged in and app users. To build awareness, we're continuing to evaluate our brand strategy. Our brand campaign, People are the Best is showing early promise with gains in Reddit's relevance and strong ad recall. We also brought Reddit communities to life through r/bodega, our first-ever community pop-up in New York City. The bodega represented 75 Reddit communities and reached hundreds of thousands of people in person and online, driving engagement, both at the event and across Reddit communities.

For our paid marketing strategy, we are starting to shift focus from reach web campaigns to app campaigns. This aligns with our strategy of potentially trading some reach for higher value engaged users. It's early, but in our experience so far, our U.S. app install campaigns can retain new users at rates comparable to organic app users. Outside the U.S., reach-based user marketing is more of a lever given the lower awareness of Reddit's brand. In the quarter, we increased user marketing spend internationally in part to compensate for the loss reach from the declines of search referral traffic. This enabled us to continue to introduce new users to the platform. We will evaluate the effectiveness of that spend over the next few quarters. And we're also exploring ways to reengage logged in and app users to sustain core usage and offset pressure from search referral traffic.

Overall, this was another strong quarter for Reddit. Our results reflect strong execution by our teams and the value Reddit delivers to users and customers. We're well positioned to build on this progress in the fourth quarter and into 2027. Thank you for joining us and for your continued support.

Now I'll turn the call over to Drew.

Thank you, Jen, and good afternoon, everyone. Q3 demonstrated again the strength of Reddit's one-o-one financial model. Simply put, we showcased cash generation, earnings power and best-in-class margins at scale. On cash generation, our free cash flow margin reached 41% in Q3, while free cash flow was $363 million, up 98% year-over-year. Reddit's cash and investments topped $3 billion for the first time. On earnings power, Q3 GAAP diluted EPS and adjusted EBITDA both grew over 70% year-over-year. Year-to-date, adjusted EBITDA surpassed $1 billion, nearly double a year ago. And for best-in-class margins, Reddit shined again. Net income margin was 32%. Adjusted EBITDA margin was 45%, gross margins were 91.5%.

I'll now provide more color on our Q3 results. Q3 revenue was $895 million, up 53% year-over-year. Advertising revenue was $847 million, up 54% year-over-year, and other revenue was $48 million, up 35% year-over-year. U.S. revenues grew 50% and international revenues grew 67%. Average revenue per unique user grew 36% year-over-year to $6.87.

Moving to expenses. We continue to invest in the business at a healthy rate. Total adjusted cost and expenses were $493 million, up 41% year-over-year, very consistent with our expense growth rate over the last 4 quarters. We continue to be thoughtful about the balance between growth and investment as revenue grew approximately 1.3x the rate of total adjusted cost and our incremental EBITDA margin -- adjusted EBITDA margin was 54%. Gross margin was 91.5%, up 50 basis points from last year. Cost of revenue was approximately $76 million, up 44% year-over-year, reflecting investments in machine learning, site performance, measurement and safety. The benefit from incremental revenue and ongoing infrastructure efficiency projects helped us to more than offset these cost increases and maintain gross margins above 90% for the ninth consecutive quarter.

Adjusted operating expenses were $417 million or 47% of revenue compared to 51% last year as we continue to gain operating leverage. Within operating expenses, the 2 largest investment areas are headcount and consumer marketing, and we continue to evaluate these spends with an ROI mindset. On hiring, the focus remains making the product better, accelerating monetization and strengthening the quality of our user base. Total headcount grew approximately 3% sequentially and 12% year-over-year. We continue to see great cost leverage and efficiency gains in the back house areas like G&A. We ended Q3 with the same head count as we had in G&A 2 years ago, back in 2024 in the third quarter.

In Q3, our total consumer marketing spend was consistent with the prior quarter. Total spend was mid-single digits on a percentage of revenue basis, consistent with Q2, but the spend mix shifted by category and region. In the U.S., as Jen noted, we shifted a portion of dollars away from web user marketing into app installs and our brand campaign. To date, domestic web user marketing spend has proven effective at bringing users to Reddit, but low retention rates have hurt ROI. Internationally, we spent more dollars on user web marketing to grow reach, driving users to the platform where the brand is less well-known, which helped to offset the declines in international search referral traffic. We'll continue to monitor both the domestic and international marketing performances and we'll adjust our spend accordingly.

Turning now to stock-based compensation and dilution. In Q3, stock-based compensation and related taxes were $136 million or 15% of revenue, down 80 bps year-over-year. Total fully diluted shares outstanding were down sequentially, landing at 206.3 million. Year-to-date, gross dilution, excluding the impact of buybacks, is 1.2%. So we're tracking well so far against our long-term guide of 1% to 3% annual dilution. After buybacks, year-to-date fully diluted share count is up 0.1%. In Q3, we repurchased about $100 million worth of stock at an average price slightly below $150 a share. We have about $660 million remaining on our current buyback authorization.

A few more points of interest on Q3. Net income was $283 million or $1.47 per basic share and $1.40 per diluted share compared to $163 million or $0.87 per basic share and $0.80 per diluted share a year ago. Capital expenditures were $1.2 million, so the business remained capital light. We ended Q3 with $3.03 billion in cash, cash equivalents and marketable securities, which gives flexibility to execute on our 3 capital priorities where it makes sense, investing in the business, M&A and share repurchase.

I'd like to share a quick point on taxes. Our Q3 tax expense was approximately $5.8 million with an effective tax rate of about 2%. So booked tax expense remains modest. We also continue to maintain our full valuation allowances on U.S. federal and state deferred tax assets. Reddit has now become GAAP profitable since 2024 in the third quarter. We're updating our internal forecast as part of an ongoing assessment to evaluate whether those full valuation allowances remain appropriate over the near term.

Turning now to the outlook. We'll share our internal expectations for revenue and adjusted EBITDA for the fourth quarter of 2026 as well as a few additional considerations. In the fourth quarter of 2026, we estimate revenue in the range of $1 billion to $1.03 billion, representing 38% to 42% year-over-year growth with a midpoint of approximately 40%. Adjusted EBITDA in the range of $480 million to $510 million, representing 47% to 56% year-over-year growth and an adjusted EBITDA margin of approximately 49% at the midpoint.

Additionally, I'd like to provide an update on our user disclosures. As the broader Internet landscape continues to evolve, Reddit continues to iterate and learn on many product changes, including an upcoming test to move the platform to logged-in only users, which Steve described briefly in his remarks. It follows that we'll continue to report logged in and logged out DAUq by geography, as they remain useful for understanding user trends consistent with our historical reporting. As we move forward, we'll continue to evaluate our user reporting to ensure it reflects how we manage and measure our business.

To close my commentary, I'd like to highlight that it was great to see Reddit added to the S&P 500 earlier in the quarter. It's a terrific testimony to the progress and the potential of the brand. It was also great to see Reddit cross an important milepost of $3 billion in a trailing 12-month revenue basis. We've made a lot of progress since we crossed $1 billion back in 2024. Our next internal North Star is $5 billion in revenue, which will require strong execution to capitalize on the unique raw materials Reddit has.

That concludes my comment. Let me turn the call over to the operator to open the line up for questions.

[Operator Instructions] Your first question is from the line of Benjamin Black at Deutsche Bank.

Steve, on the shift to the logged-in only experience, can you dig in a little bit more into the sort of the genesis of that decision? Also, what are you looking for in the test this quarter? And how do you think this could ultimately impact your top of funnel and your ability to attract more users to new communities. And then revenue continues to fairly materially outgrow users. As you look ahead to '27, how much runway do you think there is left in terms of closing the monetization gap versus some of the other social platforms before revenue growth starts to track user growth a little bit more closing?

Okay. Thanks for the question, Ben. So the transition to logged in, the genesis is like every other platform has done this. Reddit is different. We've been successful logged out for a long time. But now is the right time for a variety of reasons. One, when Reddit was born, it was the same content for everybody. Now Reddit is huge. And so the product works best when people are logged in and can get personalized recommendations for communities and content.

Second, it gives us better information for -- to target ads better. Third, it lets us better protect the Reddit corpus of data. The vast majority of the scraping and stealing of zx happens in our logged out user base. And finally, it allows us to more easily adapt to emerging regulations around the world.

Now there will be trade-offs here. So we will likely be trading reach for engagement. But when a user logs into Reddit, they engage much more deeply. The -- keep in mind that 80% of the monetization of Reddit happens within our app and logged-in cohort. And so I think there's a lot of opportunity here. It's the reason why I think many of our peers went through this transition already.

So in our tests, what we're looking for is to see which surfaces we put the log-in walls up on, when we do it. So for example, we want people to go to Reddit.com and get a taste of Reddit. We want link sharing or post sharing on Reddit to continue to work. So figuring out those nuances is really important. Studying the conversion rate on different services is really important, looking at how engagement or how engagement improves on the other side of that conversion is really important.

And so all of these things are complex. And so I think the best way to learn that is just to get to a test as soon as possible. And so we'll be doing that in a few markets outside the U.S. as soon as we can learn. And so then I'll hand it over to Jen for the revenue question, which is actually related to this.

Yes, sure. So Ben, look, demand is really strong. And obviously, we grew really nicely in Q3 and have been growing really nicely. A couple of things, over 80% of our monetization sits on the shoulders of logged-in and app users because they have order of magnitude, more engagement and frequency than our search referral logged-out users. So that's really our bedrock. And over 60% of our business is performance-oriented. So it's really based on business outcomes, right? So you heard that we increased with volume over 50% year-over-year, we tripled conversion volume. That's actually the inventory that we need to grow this performance segment of our business, and that's driven by ML work, signals, work, et cetera.

So we feel really good about our headroom here in terms of ARPU. I mean, if you look at Meta's ARPU, there's a lot of headroom between where we are today and where they are. And when you look at the engagement of Reddit users, just the raw materials we have in terms of engagement, context, that, I think, gives us a lot of confidence that we feel like we see the opportunity because we're still mid-flight in our building.

The other thing I'll just say is that I think that the CPMs -- grew more by CPMs than by impressions, and we're marketplace. You have to remember for lower funnel outcomes, you can have CPMs that are triple digits. What people are paying for is that intent and that conversion to the outcome, and we think we have a road map that continues to deliver on that for advertisers.

Your next question is from the line of Josh Beck from Raymond James.

Yes. I wanted to kind of ask on some of the changes that you are seeing within the Google traffic, if you attribute it to core updates to obviously, the way they're updating their LLMs, they obviously have a big shift towards AI overviews, AI mode. So there's a lot of compounding factors. I'm just curious if any particular 1 or 2 stood out in terms of some of the traffic trends? And then on the paid user marketing, it certainly sounds like the retention is improving and you are kind of encouraged by that. I'm just curious maybe far could we potentially take the paid user market? Is that something that you could start to really lead in to more heavily next year?

Thanks, Josh. So on the change from Google, our hypothesis is twofold. The biggest one is the AI overviews or AI mode both have evolved a lot. And particularly recently, they appear to be expanding them quite aggressively in both in the U.S. and outside. So what started as a feature is now the full search experience. And at the minimum, it pushes everyone down the search page. And then on top of that, the experiences themselves are not traffic drivers. And so these things, combined with the rollout, just means Google has really shifted in their relationship with the rest of the Internet.

There's a second factor, which we believe our machine-translated content is also being ranked lower. So this primarily would affect us outside the U.S. What this isn't likely, but we don't have visibility into this. It's the sort of algorithm change where I would say, hey, these things come and go. This appears to be really the rollout of AI mode and maybe a change in the machine translation or how they treat that.

Reddit, however, is still a top search term in Google. So this doesn't say anything about the Internet consumers demand for Reddit. People still want Reddit as Google is not sending them to Reddit at the way they used to. Given our strategies to make Reddit a direct destination, this is actually in line with our strategy because Google is teaching people that if you want to them to Reddit, you need to come to Reddit.

I can take the paid marketing question. So we just started doing app install campaigns mainly in the U.S. And so it's early in terms of scale. But what we like is that the retention that we're seeing is equivalent to our organic users. So that's promising. Now it's still a low base, so -- but all the work that we're doing in the core product around fees and notifications and personalization, that should lift retention for all the users and obviously, including the return on our app install campaign. So it's early, but we see scale there.

Less known, I'd say, outside of the U.S. We are happy that our brand work is driving efficiency in app install. So that's good. So across a full funnel approach for us, I think will make sense because it will drive consistency in terms of acquiring those app users. And I think we're going to start the process of looking at reengagement campaigns for some of our logged in and app users as well. So early, but so far, the app install shift, I think, has been promising.

Your next question is from the line of John Colantuoni from Jefferies.

Just wanted to quickly ask about the logged-in only shift. Two things there. Number one is, are you still going to offer a light version of Reddit that's available without logging in? And just to confirm, is this just a test? Or are you definitively going to go this direction? And second, on engagement, I know declines have continued into 4Q. But curious if you're seeing any green shoots beyond just user count that are worth highlighting?

Sure. John, thanks for the questions. So for logged-in, part of the purpose of the task is to answer that question you asked, is there a light version of it, which is like what is the boundary. And so we need to find the right boundary to provide value to the user, whether they're coming from a shared link or maybe from search themselves or trying out Reddit. And so I think there will be a ton of nuance in detail there for us to iterate on. And so that -- there'll be some version of Reddit accessible for those months before we do that hard prompt. This is a test, but we are going to make this transition.

I think the engagement is important. The ads targeting is important to protecting our corpus is very important. And having a firmer footing to adapt the regulation is also work. So there's a lot of reasons for doing this. And at this point, we're the only platform that doesn't do this. And so Reddit has just evolved so much and I think this just meets the needs of the time.

So on engagement, we're seeing lots of green shoots. So our work on feeds, which has been some of our most important work this year is improving engagement for new and core users. New user retention is up significantly over the course of this year and sequentially. Posts and comments are up sequentially as well. Our corpus is up to 27 billion posts and comments, 1 billion of those added in the last quarter. Time on site has been solid. Where we're seeing mixed results is total sessions are down because of that decline in search referral traffic. But we're growing where accounts, which is engagement from our app and logged-in users.

Your next question is from the line of Naved Khan from B. Riley Securities.

Maybe on a related note, Steve, maybe just talk about the opportunity for content licensing. You already had existing relationships with OpenAI and with Google for Gemini. And since you're testing logged in and planning to go down that route, how are you thinking about continuing to license the corpus to these partners?

Sure. So thank you for the question. It doesn't change -- anything we mention on the call doesn't change our perspective there. We don't have any updates to share, but we're in active discussions. But what's most important is that any deal we do needs to advance our long-term strategy and has to be a fair exchange of value. Now these deals aren't binary, however, there's a bunch of options. So on one end, there's access for training, but then there's also display and use in products. And then on the other hand, there's more specific uses of our content. So we're only going to do what makes sense and is in the best interest for Reddit strategically and economically, which does potentially include not doing a deal, but those conversations continue to progress.

Your next question is from the line of Tom Champion from Piper.

Steve, you've led the business for a long period of time. I'm just curious if the current period reminds you of any dynamic you've experienced in the past and kind of your thoughts on how to guide the company and the team through this period of transition and kind of balancing near-term and long-term objectives. If I could squeeze just one more in. Drew, just curious your latest thoughts on user monetization in the U.S. ARPU growth has been really consistent at 50% plus. Just your latest thought on that trend?

Thanks for the question, Tom. So this is a consequential time for Reddit. And this period does remind me of about 11 years ago when I came back to the company. And we've had a lot of conversations then about what is Reddit and what is Reddit and what is our place in this ecosystem. And we've been having those conversations at Reddit recently. And so Reddit's mission is to create community and belonging for everyone in the world.

And while there's overlap between Reddit and other players in the ecosystem, whether we're talking about social media or AI search, fundamentally, Reddit is communities and conversations. It's a place for people to come together. It's a fun and funny place. And it's with you throughout life's journey. And so yes, there's some overlap in utility in search and shopping. But really Reddit, I think, is a unique product on the Internet that can play a really significant role in people's alliance. And that's why our team who chooses to work at Reddit over our peers is here. And so these are the sorts of things that get us really energized.

One thing I'm very excited in the near to midterm are some of the product improvements we're making to kind of realize all of this. So there's some fun stuff we're doing in the core app experience. But I think for both new and core users will allow the user to more consistently to where they're going. So you more consistently see, this is trending. This is news. These are my favorite subreddits, Here's my games, here's some videos. That sort of work is really exciting because it really, I think, brings to life all of that Reddit has to offer. And I think that's one of the challenges we've faced for a long time is, hey, how do you sell this product in the first session, when there are so many things you can do on it.

So yes, we're seeing a lot of evolution with the Google Search ecosystem changes with the transition to logged-in only. But alongside that, we're investing in some areas of the product that I think will be really fun, and I think really great for users.

Okay. Drew, the second question was about monetization and ARPU.

Yes, about ARPU. Look, Tom, I think it's just an extension of the journey we've been talking about before. I think the ARPU potential of Reddit is as good as anybody. It's just -- we have a number of advantages, I think, as a platform that really differentiates us. I think it starts with what Jen was talking about, which is outcomes and getting the most, making every impression work hard. And I think that's what we've been really successful at.

But if I think about the raw materials or Reddit, I really think we're advantaged in a couple of ways, and we've been talking about this for a long time. It's just now come into fruition in terms of those words coming to life. But look, I think from a differentiation perspective, our consumer is just different. They're broader, they're more balanced. They're more affluent. They have more purchasing power. It's just a very differentiated consumer. A lot of our consumers aren't on other platforms, it matters, like -- and you're seeing that in our financial results.

And then the other piece I'd say, again, with the raw materials, we're just naturally commercial. I mean so many of the subreddits themselves organize into things like skiing and travel, which monetize themselves. So many of the descriptions and conversations have sort of inherent roots in commercialization. I think, again, the platform has context, right? You're not putting an ad in front of a video that doesn't make any sense. you understand and really have kind of the raw materials to be successful there. So I really think at the end of the day, it's about what Jen was talking about, which is outcomes. That's really what we're focused on. But I do think we continue to see sort of the advantages of the platform, which are the raw materials around a differentiated consumer and a really naturally commercial platform.

Your next question is from the line of Ron Josey from Citi.

I wanted to ask a little bit more just about converting or making Reddit more of a daily habit in the process of converting the WAUs to DAUs. And we talked a lot about clearly the search issues externally. But if you could focus just more on the internal products a little bit more. The deck talks about changes to the feed better personalization. We talked about search and answers in the past. So help us understand a little bit more just how will we convert the WAUs to DAUs here.

Thanks for the question, Ron. So this is what I'm starting to get at in my last answer. Now long term or medium term, I think it'll be good to show, not tell. But today, the core Reddit experience is a feed. And it's a feed of posts. And those posts all have different content types, right? You might be looking at a link, a text, video, the subreddit might be happy or profound, funny or deep. So it's all in one place.

And so one of the things that we're working on right now is adding more organization to the feed so that post for a similar job and a similar content type and a similar mood are grouped together. So that you more consistently get what you're looking for when you open the app, right? So I -- a core user, I might open the app and I want to know what's going on. I might want to have a few lots. I might be looking for the game or episode thread for the show I watch last night. I might be in a lean-back mood for videos. I might be in a leaned-in mood for games, things like that.

So I think being able to find these things very quickly when you know they're there, that's what gives people confidence to open the app as a daily habit because I know what my experience is going to be. And so I think if we get something that is a little less grab baggy from where we are today, here's a feed of a lot of crazy stuff to something that's more consistent. That's how we can drive that daily habit. That's what converts those wells to dows. And I think this will make the app more easier to understand natively to a new user because we can actually just label these things. Here is trending. Here's news. There's some games. Here's some memes.

Now we've got to build this thing and test it, and I think there will be a lot of iteration, but I think really embracing all of the different jobs that the app does intentionally is how we can develop more of this daily habit. So I'm very excited about this because we've been thinking about this for a long time.

Your next question is the line of Andrew Boone from Citizens.

Steve, I wanted to ask about the traffic that's leading from Google. And so what I'm trying to understand is what you can do to either develop the app or push on certain use cases that are going to be sticky. And so is there anything that you can explain to us about the traffic that's leading? Are they looking for more informational type of posts? Or is it just a broad-based kind of lack of exposure that you're getting from Google?

And then, Jen, as we think about the renewals coming up for 2027, in the conversations you're having with advertisers that are more brand-based, are you seeing any conversations around advertisers trying to get into pretraining where Reddit is really a way to get into their reports of data? What is that influence in terms of thinking about the renewals for the next year?

So -- thanks for the questions, Andrew. So on Google, let me start with the second part, like what is the change? So let me tell you what didn't change. The word Reddit is still among the most searched words on Google. So this says that demand for Reddit hasn't changed from the Internet consumer. Also, Google is crawling us as hard as ever. So the demand hasn't changed from their point of view either. The reality is the AI mode does not drive traffic. Not for us and not to anybody as far as I know. And so it's just a fundamental shift in how Google works. It used to be a traffic driver, now it's not.

So now that changes the equation for sure. But it's not that the users want less. It's just that they're getting. Now on the other side of that, what are the sticky use cases for Reddit? Well, Reddit is the best place to see what's going on. Reddit has the best, I think, conversations about whatever you did last night, what show did you watch? What game did you watch? We've got totally unique content, right, about every hobby, passion life stage. And so what I was talking about in my previous answer, is making those experiences much more consistent. So when you open the app, you know what you're going to get.

I think this will benefit the core and new users alike. Now that, alongside that, our work on feeds is driving results, starting now. And so just simply we've grown by an order of magnitude, the amount of signal that goes into our models, the size of our models, we've dramatically reduced the time it takes to train new models to deploy new models, all of these things are down significantly in the last quarter, and we've got a whole, let's call it, another year of runway there. So just the feed itself right now is driving more engagement for new and core users. So I think there's short-term work we continue to do on the feed. And I think a lot of exciting product work that will make this kind of sticky or daily use cases, more effective on Reddit.

Okay. So Jen, the second question is brands and retraining.

I was going to ask just for a clarification. Do you mean -- are you referring to like the idea of brands wanting to come to Reddit to be on ready to kind of show up in LLM? Is that...

Yes, correct.

Okay. Yes. So look, the reason to come and advertise on Reddit and we say this really clearly is to come for the engaged audience and to get competitive outcomes to grow your business, right? That's scalable, it's repeatable, it's measured. It delivers more and more ROI, and that is why advertisers come to us and why they're growing their share of wallet for us. It's like that core proposition for reaching the Reddit audience. I think there's been this idea of like GEO or kind of organic, et cetera.

And I was just saying we've been very open about this with our partners, like we're pretty skeptical of GEO. Reddit itself is pretty inoculated to like manipulation, I would say. And yes, it is good to spend time within subreddits and have more fans and more customers within Reddit by using our scalable marketing platform to get those outcomes. Because they might talk about you, and you need customers in order to have that experience.

But that's not the primary reason our advertisers come to us. The reason why they work with us is because of reaching that highly engaged audience where they're able to get business outcomes from our marketing platform. So it's not in our partnerships today. It's not a core piece of what we do with our advertising partners today. I understand from their point of view, something broadly that they're thinking about because they're also dealing with changes in the broader search landscape, but it's just not a part of -- it's not a centerpiece of what we're doing.

Your next question is in the line of Vasily Karasyov from Cannonball Research.

Hello. Sorry about that. My question is for Steven. Steven, at the conference a couple of months ago, you said that down the road, you can see Reddit making some acquisitions to help you expand the user base. So I was wondering if you could tell us a little more what kind of company could do that for you? And is that something more of a priority now that given how the trends have been playing out since you said that?

Thanks for the question. So when I think about M&A, there are a couple of possible objectives. What we've done historically has been small- to medium-sized teams plus their tech. We've not done a serious acquisition for users, and that's not on our radar right now. The best way for us to grow users is to capture the opportunity that we have right on our doorstep.

We have 3 major channels even today. The first is our unattributed downloads. We see a ton of unattributed downloads every day. So these are people basically word-of-mouth users who are interested in trying Reddit. And so that is why we have been so focused on new user retention. Now we really moved the needle here, and I think we have plenty of room to go. But new user retention is up over 50% year-on-year. So providing those users a better experience.

Second, Reddit has a large number of reinstalls every day. And so we think this is users coming for a particular type of content and then uninstalling Reddit when they're done. And so we think adding an incognito mode, basically a private browsing mode in our app will help mitigate this effect. And then finally, we've got the conversion from mobile lab for the search referred users. While the surge referrals are in decline, there's still a lot of them. So we've been driving that conversion for the last couple of quarters.

And as I mentioned in my script, this quarter only showed that conversion prompt to about 13% of the eligible audience there. So there's plenty of room to scale. So I think before we start thinking about using acquisition to grow users, we need to make our product the most effective way to grow users because the opportunities are basically at scale and on our doorstep. And there are very, very large. It's hard to move the needle against the results we'll see through even small improvements to new user retention.

Your next question is from the line of Jason Helfstein from Oppenheimer.

I appreciate you giving us a heads up that you're testing logged-in only, but it is the plan. So I guess as we're all sitting here saying what does kind of the modeling look like in that world, whatever does happen, I mean, obviously, your -- the effective ARPU from a logged-in, you're obviously, mathematically becomes a lot higher, but is there just a way to kind of help us because how we should be thinking about it? Do we go okay, logged-in is 20% of DAU and then we have our own version of a logge-in ARPU. How has to think about that because we're all going to be doing that?

And then second, I mean, should we now assume that if you go long, then you will make Reddit not scrapable? And I guess, talk about the implications of that?

Okay. Thanks for the questions. Look, the reason we're doing the test is to learn the answers to these questions. So we know logged-in users engage much more, right? And we've mentioned this a couple of times on this call, 80% of our revenue -- over 80% of our revenue comes from logged-in users. So growing that base is very, very important. Making Reddit logged-in only will assuredly grow that base. But what the conversion rate is over time, we just don't know. That's why we have to do the work. And that's why we have to test like where is the right spot to draw these boundaries.

Each of our peers have had a lot of success doing this, but they all do it in slightly different ways. And I'm sure we will find a way that makes the most sense for Reddit. Will this make Reddit harder to scrape? For sure. That is one of the reasons. It's not impossible. But again, all of our peers have done this for a long time for this reason. And Reddit with this extremely valuable corpus, this change is really important to protect access to that and make it intentional. So like I said, we're going to do this, but the effects on the ecosystem will have to test. That's why we're doing the test.

Your next question is from the line of Ygal Arounian from Wedbush.

Sorry, not to harp on this but really -- but just to understand, as you test this on the log value users, so the expectation that over time, that gets to 0 or close to 0? I know a lot of it comes from the testing on what happens. But is that the expectation you got some percent that will convert to a willing to logged-in and some that fall off? And then on Google and AI reviews and sending traffic out, one of the things we saw yesterday is pressure on Google's ad revenue driven by this, right? And so they're seeing an impact on this as well, and they talked about starting to monetize more, putting more ads and ultimately, unless the entire sort of quit pro quo for Google's ad product changes, sending traffic out to the web is an important part of how they monetize too. Do you -- is there a scenario down the line where you see that sort of coming back, the pendulum swinging back a little bit and that can be a benefit for you guys?

Okay. So question one, logged-out users, does it go to 0 or close to 0? But I can't tell you. I think we'll always have some amount. Maybe this is a little bit of the second answer. I think we'll always have some amount of traffic from either search referrals, I mean, sharing, we'd love to really grow that. So that's kind of by its nature, logged out at first. Front-page traffic, right, people curious about Reddit. So we'll always have that component.

But I think when we look at the business over the long term or even shorter, we would expect app and logged-in and total DAU to probably more or less converge plus or minus some small percent because that's just where the core of our product is, and so that's where we're going to be driving people. For AI overviews and traffic, look, we don't control Google. We only control Reddit. They've made so many changes, and I expect there's more to come. Like I said, AI overviews or AI mode, it's just not a traffic driver. So we're not counting on that. We make no assumption about where that goes or doesn't go in the future.

What's most important is making sure that Reddit is a direct sticky daily destination, and that's all the work that we've mentioned on this call. That's what we can control. Our work there is working so far. And so I feel very good about it. And we'll let the rest of the ecosystem evolve as it well.

Your last question is from the line of Doug Anmuth from JPMorgan.

[indiscernible] for Doug. Just curious if there's anything to call out on 3Q revenue growth, just given the upside was a little bit less than what we've seen from you guys in prior quarters? Whether that's a function of users and inventory or anything else to call out there?

Look, I think third quarter was a good one. We grew 53%. There are not a lot of companies growing at 53%. We're -- we still enter the quarter with about 50% of our business booked. And so we're making estimates about what we're going to get and not get in the quarter. I think as Jen said in the quarter, the demand was very, very strong. I think there are a couple of unique dynamics within the third quarter, particularly September is very strong. The demand is very concentrated in the third quarter to September. And then if you double-click on September, there were some days that we had that were particularly strong.

So there was some bookings that we weren't able to deliver on a couple of days. But overall, no, it's a good quarter for us. We're happy with it. The momentum was strong. And as I said, from day 1 to day 90, the demand was very strong in the quarter.

There are no further questions at this time. I would now like to turn the call back to Steve Huffman, Founder and CEO, for closing remarks.

Okay. Thanks, everybody. As always, we appreciate your time, and attention and questions until next time. Bye.

This concludes Reddit's Q3 2026 earnings call. You may now disconnect.

So in the interest of time, I think we're going to get going on the next one. It's my pleasure to host the team from Reddit at the conference. We've got Steve Huffman, CEO.

Steve, thanks so much for being part of the conference.

Thanks, Eric. My pleasure. Thanks for having us.

Okay. So before we get started, I've got to do my legal duties. Some of the statements made today could be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to Reddit's Forms 10-K and 10-Q, including the risk factors. Any forward-looking statements made are based on assumptions as of today and Reddit undertakes no obligation to update them.

Okay. So with that out of the way, you went public in the middle of 2024, the company has scaled meaningfully since then. Talk a little bit -- let's go backwards before we go forward, and talk a little bit about the journey the company has been on and how the company has evolved over the last 18 months.

So since going public, it's been a nice run. We have been profitable on a GAAP basis for a while now. We've had 60% revenue growth, 8 quarters in a row, 90% gross margins. We were added to the S&P 500 a couple of weeks ago, and like in a surprise adding, so that was just a nice little bonus. So I think the success we've seen as a business is something we're very proud of. And I think we're on a great trajectory and we're very excited looking forward.

Okay. When you do look forward, what are the 1 or 2 user-facing developments or things you're working on that you think have the greatest potential to change the company when you think over the next couple of years?

So people crave human connection more than anything. And we see at Reddit that the formula for us is pretty simple. When we make the product better, we grow, and we grow in our most valuable cohort of users, which is users who are interacting with the communities on Reddit directly.

We see every day a few hundred thousand unattributed new app downloads. So this means not referred from Google, not paid, so people who are curious about Reddit downloading the app and trying it every day. So the most important thing we can do is help those users be successful, help them experience the magic of Reddit.

This is not easy. At the surface level, Reddit might look like social media. But the actual content experiences are wildly different. So making that connection and helping those users be successful and experiencing Reddit the way we intended to, that's the name of the game.

So the work that I'm most excited about I think is our feeds work. So in the feed, the feed both as an opportunity to educate the user of what Reddit is, show off what Reddit is there, help them -- or what is there for them on Reddit, help them discover new communities on Reddit. And in this era with AI and LLMs, we can have an opportunity to do a much better job at this, because we can organize the subreddits better, know what's there better, make that connection more effectively. So I think there's a lot we're excited there.

The TAM of Reddit is every Internet user. Every person on the planet has communities, has hobbies, has interests, has things they're going through. So Reddit can be as big as anybody. And it's in those first moments when you open the app for the first time that I think we have the most opportunity to make that connection.

In the last quarter, we improved retention of new users by 50%. So that number historically has been difficult for us to move, and now we're chipping away at it. So that's something we're very proud of. And so this is driven by ML in the home feed, this is driven by performance. This is driven by converting web users to app users. So we're starting to see some momentum there that we're very excited about.

And just to put a finer point on that, so the #1 needle mover is, here comes someone into your app, and making sure they see and get sourced the right amount of content is pretty critical to driving that retention metric you talked about?

Yes. So there's actually 2 cohorts of users where this work helps a lot. So it's the new user, which is we've been talking about. Okay, you're a new user, what is Reddit? What are the magical experiences? I'll give you an example.

One of our fastest-growing communities this year -- actually the fastest-growing community this year on Reddit is called GirlDinnerDiaries. So a post on GirlDinnerDiaries is a picture of food, it's like microwaved food, and then a long story about their bad boyfriend. It went from 0 to 6 million readers this year, and it really exploded this summer.

If you see it in the feed, it looks like a picture of chicken nuggets. But if you read any of the posts, it's a story that's literally never been told before. And there's many, many of these every day and there's thousands of comments on every one of these posts from this community. And it's not just women. I mean I know about it because I'm reading it too. And so the opportunity in the feed is to create more of these magical moments for our users, because this content doesn't exist anywhere else online and it's really, really interesting.

Now the same is true, the other cohort of users that really matter, is the core users, helping them get to what they're looking for on Reddit. I might open Reddit because I want to be entertained. So that was an example of entertainment. But I might be looking for the thread of the episode I just watched or the game I just watched. Or I might want to run a search or I might want product review information or I might want to help with something. These are all the use cases that you might open Reddit for. Figuring out what my need is and getting me there quickly, that's where we have a lot of opportunity as well.

Conveniently, the work we would do to make the new user experience better and the core user experience better is the same. It's that triage in the first moment. "What are you trying to do? Let us do it for you." So I think we have a tremendous amount of opportunity there. And every time we make improvements there, big or small, everything we care about moves in the right direction. So it's fun work because we get to make the product better and then we get to see it help make the business better.

You said something really interesting, you have the uniqueness of content. And if we painted a broad brush, more and more of the Internet is being impacted by AI. How do you think about Reddit's place in the broader Internet ecosystem relative to the wave of AI-driven content that's sort of making its way into our daily lives?

Well, we have a word for AI content. It's called slop. And people don't like it. And I'm only half-joking, right? AI is very powerful, AI search is very powerful. But the more that the Internet is summarized and sanitized and, I think, actually dehumanized, the more a platform like Reddit stands out, because people want to connect with other people about their interests, their passions, whatever they're into.

The example I just gave about GirlDinnerDiaries, AI can't do that, right? AI is not a bad boyfriend yet. Maybe we'll get there. But then I'm sure there'll be a subreddit for like whatever, my AI boyfriend is so supportive, or is too supportive, or whatever it is. My point is, there's all of these experiences and perspectives that come from other people, and the AI world creates a premium on these human experiences. And that's what our product is. And so Reddit stands out even more.

It's not dissimilar from the journey we went through over the last 10 years where Reddit stands out because it's not social media. Now we're in the era of Reddit is not AI.

Now the paradox there is we use AI all over our product, we can make a better product, a safer product. Reddit's content is used to create AI. But ironically, Reddit is for humans, and there's a big market need for those human experiences.

Okay. So we've talked about the content being unique and you've talked a little bit about how you're onboarding newer users to the platform while still serving your core users to the platform. Can you talk to us a little bit about what you've learned and seen around user engagement in the past couple of quarters?

So we're seeing some great things there. So in the last quarter, we saw 1 billion new posts and comments. That's about 4% of our corpus. We're 21 years old, 4% of our corpus was created in the last quarter. So contribution is growing in a very healthy way.

Now overall engagement can be a little trickier because users season into Reddit over time. So the longer a user is on Reddit, the more communities they're a part of, the more time they spend on Reddit. So new users can sometimes dilute overall time spent. But that's a good thing because we're bringing in more and more users into our communities, and they go deeper and deeper over time. And then our core users are engaging even more and contributing even more. So we like what we see there right now.

Okay. Pivoting to the relationship with Google. You have a partnership with Google. Can you talk broadly about how that partnership -- what it does today, its existence today, and how you think about the relationship, which is multifaceted between yourself and Google, and how it's evolving?

Sure. So we start with the informal relationship, which is the Internet consumer has long benefited from Reddit being well-indexed and showing up in Google, because many people start their Internet session with Google and then they end up on Reddit, often on purpose, right?

We can see this because the word Reddit has been in the top 10 searched words on Google in the U.S. for the last couple of years. There's only a couple of brands in there. It's usually things like news, map, weather, Reddit. So the Internet consumer wants Reddit content. So there's no question the value of Reddit to the Internet consumer and the value of Reddit's data for search platforms like this.

Now there's also 10 blue links where Reddit has been a fixture for a long time, and now there's AI Overviews. I think all of these things are different touch points. I can't comment on some of the specifics because we're in active negotiation. But the foundation is the Internet consumer wants Reddit by name, and then a search platform needs Reddit's content because that's ultimately what people are searching for.

Okay. To broaden it out, like how do you think about that role of Reddit content not just in the 4 walls of Google, but in the 4 walls of sort of a wider ecosystem of, as people continue to query various platforms and your content being unique, ends up being a source of traffic for a lot of other platforms?

Right. So again, at the foundation, people are searching for answers, right? They're searching for knowledge. And Reddit is one of the best repositories of human knowledge on the Internet. And so we'll show up in search indices on AI models.

I think what this shows is the opportunity for the users who don't know about Reddit yet, who are accessing it indirectly, for them to be direct Reddit users. Because we can meet their needs better than anybody else because we have all of the data and it's all organized and labeled. And so I look at all of that indirect usage as basically the opportunity of our direct user base or the opportunity for the increased size of our direct user base and converting them to Reddit users.

Many of them are already direct Reddit users. As I mentioned before, they search for Reddit by name. So they know they're going to end up on Reddit one way or the other. And we want to convert the other half and let them experience Reddit directly as well.

Okay. And then just last one on this topic, when you think about that partnership today, how would you differentiate between the traffic elements of the partnership and the data elements of the partnership?

So what's most valuable to Reddit is bringing users into the Reddit ecosystem, right? We want to grow our direct user base. That's where our business lives. So the Reddit business that's been growing over 60% for the last 2 years, that largely exists in our app and our core user base. So anything that helps grow that ecosystem is really important.

But then traffic that's logged out or transient is just less meaningful to us, which is why we can see volatility in SEO traffic, and that doesn't turn into volatility in our business. It's because the 2 just aren't really that connected.

But within those logged-out users are lots of opportunity for core Reddit users. So that conversion has been really important to us. So converting those mobile web users into app users, we've been doing a lot of that in the last quarter. And that's part of the reason we're able to drive new user retention so much in the last quarter, is we're converting these users, who are basically already Reddit users, into the app.

On the data side, right, it's a different conversation. That's a -- so Reddit's data is used -- has been used to create every AI model that you've heard of, some with our permission and some without. And so the value of that data is tremendous. And I don't think anybody is debating this at this point. And furthermore, the companies aren't even denying having used Reddit data at this point. It used to be maybe an open secret, now it's just open.

For us, I think whether these relationships are formalized or not, Reddit wins because we have the data. We have the content that the models want. We have the content that the Internet consumer wants. And we will productize it and expose it in a way that is most accretive to Reddit. So that could be through partnerships, which we've done so far, and it can also be building our own products around search and shopping and all of these other behaviors that I think are important. So I think either way, Reddit is in a great place because we have the fundamental thing that people want, which is the knowledge and perspective that comes from other people.

Okay. Anchoring around what you talked about earlier with the uniqueness of content on the platform, one of the most important aspects of the company is the moderator community in fostering and growing that unique content. What's the current health of the moderator community and Reddit's relationship with mods today?

So moderators, when we say moderators, it's different than other platforms. Moderators are not employees of Reddit. Moderators are the users who create communities. And they're the lifeblood of Reddit, right? Reddit is communities, and these are the people who create the communities. They write the rules, they're the stewards of the culture of these communities.

So our relationship with mods is good and deepening. So there's lots of different touch points here. But the moderators are involved in every aspect of Reddit. And I talk to them a lot, about the things we're building, the things they need, where we're falling short. We get a lot of feedback from them.

One of the things -- the evolutions I want to go through, that we're in the middle of, is the moderators basically have the ability to remove content from subreddits. So this is how, for example, a community I mentioned, the GirlDinnerDiaries one, communities like that, where when you go read every post and every post is in the same structure and tell stories in the same way, that doesn't happen on accident. The mods are doing real work there to reveal that.

So we want to help mods be more effective at that and evolve them from having to be the bad cops all the time. So this is another area where AI is really exciting, where LLMs can be really helpful, which is enforcing the community rules at scale. So instead of the mods having to do that, the mods can write the rules, they can set the tone, but we can let the computers do the dirty work.

And then mods can be the good cops, right? They can be the stewards of culture. They can do the things that bring users in. They can feel really great about growing their communities. And so I think that evolution is something we're very excited about, is helping AI do the day-to-day stuff and with mods being the guiders of that, and let the mods do the more fun work and really create and deepen these community experiences.

So sticking with that theme and maybe playing it out over multiple years, what do you think the number 1 or 2 things you'd like to build from a product standpoint that would help moderators more generally and continue to grow the community and continue to scale sort of the satisfaction of folks who want to play that role as moderator?

So there's 2 things. So the first is what I was just touching on. Helping mods, this is something where we have out now and are iterating on it, called the Rules Hub. So letting the mods write the rules, and then you can see how those rules would impact your community. So you can get the rules really dialed in so that you bring into your community the exact users and content that you like and you can keep the rest out.

An important part of communities, just for what it's worth, is the boundary, right? If there's not a boundary, like outside and inside, nonmember, member, that sense of belonging, there's no community. So the boundary is really important. And so the mods maintain that boundary, but AI can help them be much more effective at that.

The second thing we're doing is in the feeds. The feed is the primary way new communities are discovered, right? The feed is how we help the user find the communities they may love. And so when done well, you can grow a community with community members that contribute and make the community better and better. If done poorly, you send a firehose of users every which way and the community experience actually gets diluted. So that triage, that matchmaking process, that's the job of the feed. And I think we can do a -- continue to do a better job at that.

The example I keep using today, GirlDinnerDiaries, I think is a really good example, right? It's a small community of people who contribute to it, but the reading audience is vast. And so helping it get discovered but also keeping it safe and protected, that's the double duty that we do on the feeds. So we can help mods be better mods and we can help mods grow communities in a healthier way.

Okay. That's really helpful. If you look at the balance sheet for Reddit, you've got $2.8 billion of cash on the balance sheet as of the last quarter. And estimates of the sell side would have you generating over $1 billion of free cash flow this year. How do we think about capital allocation for the business? What are your priorities, especially when you think about the balance sheet you have relative to optimizing for returns?

So like Reddit as a business is 1 of 1 in our ability to generate cash, especially at our scale. So we have 3 priorities. The first is invest in the business. So this is quite simply people and compute. So hiring people to build the products that we want to build and getting the compute to run the engine.

The second is M&A. So we're getting more active in this space, just finding other companies that can accelerate our roadmap, bringing great tech into the company, great -- bringing great teams into the company. And third and finally is share repurchase. And so we've done, I think, $250 million this year, probably on track for about $500 million. And so there's opportunities for us right now to continue doing that.

And so we'll do all 3. But it's really invest in the business, look at M&A and share repurchase.

Maybe just to parse out 2 of those. With investing in the business, what are the 2 or 3 things you're the most excited about allocating capital to that can grow the business over the next 3 to 5 years?

It's the core product. It's the core product first. So this is -- I say it in one word, feeds, but there's so much behind that. So it's the engine, that recommendation engine that powers the feed, that powers push notifs, that powers e-mails. But it's also really onboarding, right? It's bringing new users into the right place on Reddit. It's navigation. It's helping core users like me find where they're going in Reddit. So that's a big investment of ours.

I think we said we're probably a year behind the state-of-the-art -- a year to 18 months behind the state-of-the-art for feeds. And so I think there's a lot of opportunity there. So that's people and compute.

Other areas are search, are video, is shopping. Because we think of Reddit as our work is like horizontal, so what is the infrastructure that makes all of Reddit better. So this is like the recommendation system, this will be like the video platform, this is the search system. And then the vertical slices through that. What are the specific use cases that each community can use to build on top of those things?

And so we're doing both right now. There's -- Reddit, it's like -- it looks like a simple feed of posts, but it almost behaves like a super-app. There's so many different use cases in Reddit. There's so many opportunities to productize every single vertical, right? I'm a game player, I'm a video game user. I'm a TV watcher, I'm a sports watcher, I love reality TV. I'm a parent. There's all these different -- I'm shopping for something. So revealing each of those use cases really intentionally is the other set of work that we do.

Okay. And then just a follow-up on your answer around M&A, I just want to make sure I understood the clarifying point. It seems like there's the ability to either buy versus build, and M&A could be a lever that could accelerate product capabilities, talent in the organization. Is that the way you kind of think about it, as opposed to like scale? There tends to be 2 types of M&A. Yes.

Yes, exactly. For us, it's team and technology first, as opposed to expanding our land. So we've had a lot of success, particularly on the ad side, bringing in technology that's accelerated our roadmap, bringing in experts. One of the best ways to bring in the top, top talent is through acquisition.

For us, I think down the road, there will be opportunities to expand Reddit's user base through M&A. But today, the best way to grow users is to improve our product and technology because we have so many new users trying out Reddit every day, right? Hundreds of thousands of people every day downloading the app for the first time, who are curious about Reddit. That's a massive opportunity. And meeting their needs, that will drive the growth that fuels our business in the most healthy way. So that's where our attention is.

I would love there to be a day down the road where we feel really great about that new user experience and retention and we can widen the aperture. But today, it's technology, it's teams, it's those experts that can help us realize the core value prop of Reddit.

Okay. Super clear. We only have a few minutes left, but I want to try to bring all of our conversation together in maybe sort of one big-picture question. I don't know if it will be one answer or if we'll go a little bit deeper. But if we think about what you've talked about so far, Steve, the business is operating at a certain level of growth and a certain level of margin that's very good. And then there's these debates around users and Google and other things.

So you have a business operating on one side and a stock that's down year-to-date. Talk a little bit about what you think investors might be missing in the scheme of the stock relative to what you see from inside the company and the way the business is operating?

Sure. So that's a great question. If I were to go through the misconceptions that I hear a lot, I'd start with, one, people wonder about just the TAM for Reddit. They'll say, Reddit is a niche product. I'd say, look, Reddit is a community product and every person belongs to communities, has interests and passions. Therefore, the TAM of Reddit is the entire Internet.

Now Reddit's communities might be niche, but it's every niche. And not all of our communities are niche, right? Our communities also represent news, sports, politics, video games, these like massive, massive categories. So that's one, is people just think Reddit is always going to be smaller than the biggest people. And I would say Reddit can be as big as anybody.

The second, it sits downstream from that, is I think investors worry that Reddit is going to get stuck at the $4 billion to $5 billion revenue range because some of our similarly scaled peers have gotten stuck there. But the difference between Reddit and I think the other people at our scale is, again, that our TAM is literally everybody. It's not a product that's episodic. It's not a product that's limited demographically. Literally, if you're, call it, over the age of 17, men, women, nerd, normie, super Internet user, casual, like there's something on Reddit for you for sure.

And combine that, so the universal appeal on the user side, 40% of the conversations on Reddit are commercial. So it makes Reddit a natural place for advertisers to be. Every company's customers are on Reddit somewhere, probably talking about their company, if not their space or specific product. So the commercialization -- the commercial opportunity is actually far greater than I would have even guessed a decade ago.

So my partner in running Reddit, Jen, she joined us about 8 years ago, we were sub-$100 million in revenue, now we're coming up on a $3 billion run rate. So she and the team have built an incredible revenue engine here that shows no sign of slowing. We've been 60% for the last 2 years. And I think on the user side, we have so much opportunity, and user growth drives revenue growth.

The third is that our ads business can't be as good as Meta or Google because we don't have the social graph. But we have the interest graph, which I would argue is even more valuable. Like we know what you're interested in, what you're thinking about buying, what you're thinking about doing.

Like on Reddit, these may not sound like commercial queries at first glance, but everything I'm about to say really turns -- boils down to, what should I buy? But it's not, what should I buy? It's, what should I wear? What should I watch? What game should I play next? Where should I go on vacation? What's the best restaurant? What's the best service provider?

These are just things that people talk about. Not just talk about on Reddit, this is like what people talk about. It's just whatever you talk about in the real world, people also talk about on Reddit. And so there's an opportunity there to make that connection between the user and the purchase, between the user and the brand, I think, in a really direct way.

And then the final misconception that I hear all the time is that AI kills Reddit. I mean, ironically, AI doesn't exist without Reddit. But the principle here is that in an AI world, there's a premium on human experiences. All of the things I've mentioned about Reddit, like all of the human perspective that drives those purchasing decisions, all of those stories that people tell on Reddit but don't tell anywhere else, this is like the GirlDinnerDiaries example -- now, by the way, there's also a BoyDinnerDiaries, and all these other like offshoots. The girls are funnier in this case. Those things don't -- AI can't do that.

And so AI can replace a lot of commodity content. It can make navigating search results more effective. But it's not going to hold a conversation about the things you care about. And to the extent that it can, it's coming from Reddit anyway. And so we have a say in that matter.

Okay. All right. I think with a few minutes to go, we're probably going to leave it there, unless maybe -- I'll maybe just ask it this way to kind of bring it all together. So you talked about the content side, you talked about the feed side, you talked about growing the user base from the traffic you're getting today. Which of these would you tell people to focus the most on in terms of where you're spending your most time when you think about the next 12 to 18 months?

So as it happens, growing the users, both improving new user retention and improving the core user experience, everything points to more or less the same work, which will come down to: when you open the app, can we get you to the place that you're trying to go as quickly as possible? Are you there to be entertained? Let's show you a few funny posts. Do you want an overview of what's going on? Let's show you some news and trending. Are you trying to play a game? We've got those. Are you looking for the game thread for the game you just watched? Like a sports game. We've got those too.

So that work that I've been reducing to a single word, the feed, is what's absolutely the most important. So that investment in the feed, that investment in the feed UI, that AI investment into the guts, the back-end of feed, that's what's absolutely the most important. Because we have so many new app downloads every day of people who want to be Reddit users, capturing them and getting them to come back the next day and the next week, that drives the core user base, that drives the content ecosystem and that drives ultimately the ad impressions that fuel our business. So more users returning into the app every day, that drives the whole business. So that's basically our single-minded focus right now.

Understood. All right. Well, Steve, thanks so much for coming to the conference and being part of the conversation this year. Please join me in thanking Steve and the Reddit team for being a part of the conference.

Thank you all. Thanks, Eric.

Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to Reddit's Q2 2026 Earnings Call. [Operator Instructions] I would like to turn the call over to Jesse Rose, Head of Investor Relations. You may begin your conference.

Thanks, Julianne. Hi, everyone. Welcome to Reddit's Second Quarter 2026 Earnings Call. Joining me are Steven Huffman, Reddit's Co-Founder and CEO; Jen Wong, Reddit's COO; and Drew Vollero, Reddit's CFO.

I'd like to remind you that our remarks today will include forward-looking statements, and actual results may vary. Information concerning risks and other factors that could cause these results to vary is included in our SEC filings. These forward-looking statements represent our outlook only as of the date of this call, and we undertake no obligation to update any forward-looking statements. During this call, we will discuss both GAAP and non-GAAP financials. Reconciliation of GAAP to non-GAAP financials can be found in our letter to shareholders. Our second quarter letter to shareholders and earnings press release are available on our Investor Relations website and Investor Relations sub-rate.

And now I'll turn the call over to Steve.

Thanks, Jesse. Hi, everyone. Thank you for joining us, and welcome to our earnings call. Q2 reinforced something we believe deeply. As the Internet becomes more automated, the value of authentic human conversation continues to rise. We saw that reflected in both our commercial success and early progress of our product growth. We delivered our eighth consecutive quarter of over 60% revenue growth, hit an adjusted EBITDA margin of 43% across the major milestone we've been chasing, $1 million revenue per employee. These results speak to the strength of Reddit's monetization engine and the differentiated value we provide advertisers. I heard that clearly at Can last month, where we met with many of our customers.

Across the board, brands told me they believe in Reddit's is distinct ability to connect them with highly engaged, highly intentional audiences. More than that, they are rooting for us to win. Reddit works differently from our platforms. and that's important to advertisers and people alike. As the Internet becomes flooded with synthetic content, people are creating real human perspective. We are the antidote to an automated web. AI compresses the Internet into summaries. Reddit delivers the opposite, deep discussions, passion at the base and live experiences. People don't want a summary of Reddit. They want to read it.

As AI makes information more abundant, the challenge is no longer finding content, is finding context, personal opinion and firsthand accounts. Everything online feels flat, polished, generated or sponsored. So consumers are overwhelmed and increasingly skeptical. We've never had more information, but we've never trusted it less. That's why decision-making is shifting from single authorities to groups of real people who have nothing to gain from you purchasing a product. And it's not just purchase decisions, it's health, careers, travel, everything.

Our top priority remains growing our daily active user base by improving the experience for new users, so they come back more frequently. Everyone belongs on Reddit because everyone has content, because Red it has content for everyone. We already have a massive base of weekly users, and our focus is on converting them into dailies. Our product work is improving engagement in key areas. Updated feed models are increasing contribution rates and session frequency, and we're successfully driving more web users to our app where they are far more engaged. We've made it easier to post on Reddit and to find the right community to post in.

We've also broadened the product in ways that support growth and engagement. Video in comments helps expand our upper funnel and interactive games our developer platform drives repeat usage daily habit. On a weekly basis, Reddit now reaches over 0.5 billion people, including more than 130 million daily. In Q2, we improved our user mix and brought more high-quality users to Reddit it across the app and site and new app user retention, an area we've discussed frequently was up 50% year-over-year on a relative business this quarter.

Now this is coming from a small base, and we have a lot of work ahead of us, but it's an important sign that we're moving in the right direction. These product efforts, paired with consumer marketing helped drive daily active users and offset headwinds in users coming from search. Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter. But the bigger picture is unchanged. The commercial business is strong. Our revenue growth is differentiated, and we have much to be encouraged by on the product side.

While our visibility and referral traffic remains low, we're not building for drive by traffic or building a daily destination. Our product work is what will get us to our goal of 1 billion daily users globally and $100 million in the U.S. That work takes time to gain traction, but is what will deepen engagement, strengthen our monetization flywheel and drive more durable growth.

The Internet is divided between machines and humans. There is room for both, but we know who we're building for. People will always want to hear from other people. Real opinions, expertise, stories and communities where they can ask, learn, argue and belong. Reddit has continued to grow every major change on the Internet because the underlying need has not changed. Human connection is existential and Reddit is the most human place on the Internet. That's why I'm so confident in where we're going. Thank you, as always, for being along the ride of us, and now I'll hand it over to Jen.

Thank you, Steve. Hello, everyone. Q2 was another strong quarter for Reddit, reflecting the momentum of our advertising business and the differentiation of our platform. Red its billions of conversations across hundreds of thousands of communities give advertisers a unique way to reach high intent audiences and drive measurable, consistent returns. In the age of AI, authentic human conversations have become more distinctly helpful, desired and valuable. We brought this message to life with the launch of our brand campaign, People are the Best. The campaign celebrates the people who come to Reddit every day for real perspectives, recommendations and advice, and the communities that help keep the Internet humans.

And our research continues to show that no matter where the consumer journey begins, Reddit helps influence purchase decisions and accelerate outcomes. This message resonated at Can Line where we met more than 1,000 customers and partners. Helping people access human perspective is central to our mission and strategy to reach 1 billion daily users and to help advertisers connect with more audiences. Now moving to our results.

In Q2, total revenue grew 61% year-over-year to $805 million, and advertising revenue grew 64% to $762 million, reflecting broad-based strength across the business. Revenue growth was driven by both pricing and impressions, demonstrating the increasing value we deliver to advertisers. Reddit's content and communities combined search like intent with the depth and breadth of social, creating a distinct and valuable audience for advertisers to reach and drive results.

In Q2, we turned this attempt into outcomes with conversion volume growing over 100% and click volume growing over 30% year-over-year. In Q2, mid- and lower funnel performance objectives contributed meaningfully with revenue from dynamic product ads and app installed each more than doubling year-over-year. We saw strength across our sales channels, including large customers and scale. Our scaled channel revenue, which includes mid-market and SMBs, doubled year-over-year. We also saw strength of our industry verticals, particularly retail and travel, while active advertisers grew over 70% year-over-year.

Now I'll discuss our progress across the ad stack. Our strategy is to make businesses of all sizes successful in Reddit by delivering market competitive outcomes across objectives, and our ongoing investments are measurable and delivering returns. We're executing against 3 areas: scaling automation through our ads platform in Reddit Max, delivering advertiser value across the full funnel, expanding the Reddit for Business ecosystem.

Starting with automation. Reddit Max launched a private beta earlier this year, and we're seeing strong adoption and performance for mid- and lower funnel advertisers. The number of advertisers using Max grew over 60% from Q1. And while Max revenue grew over 150% during the same period. We continue to add capabilities to the Max suite. In Q2, we added the app install objective to Max campaigns and launched tailored creatives, which uses AI to identify relevant communities and audiences than design variants on Adviser creative to improve ad relevance performance.

Max campaigns are proving to drive better performance for advertisers and high LTV customers. For example, Lenovo achieved 40% higher purchase value with Max than with standard campaigns demonstrating how AI-driven optimization can turn high-intent users into high-value customers. Looking ahead, we plan to expand acts to a broader range of advertisers and make it the primary onboarding experience for SMBs. We also plan to introduce new features that simplify activation and continue enhancing our models to drive stronger performance.

Now moving to our progress across marketing objectives. With more than 0.5 billion weekly users Reddit delivers strong outcomes for brand advertisers in the upper funnel. Video views was our fastest-growing upper funnel objective, more than doubling revenue year-over-year. Our 62nd engaged video views goal which became generally available in January, helps video-first advertisers optimize for longer, more meaningful views.

In testing, the objective delivered over 130% lift in 6-second view through rate, over a 70% increase in video completion rate and an 80% reduction in cost per 6-second video view with auto bidding. Video is a growing user and ad content format on Reddit and an area of continued investment across the consumer and monetization road maps. We recently launched video in comments and with investments in our interactive and AMA ad formats, we see an opportunity to offer advertisers more distinctive creative experiences that help them build brand awareness and connect with their customers in a unique way on credit.

In the lower funnel, shopping and app install objectives are delivering measurable growth when comes to advertisers Max campaigns for pads and debate with tests showing an average 15% reduction in cost per action and a 28% increase in results volume. Using Max campaigns on Reddit online pharmacy more achieved a 20% lower cost per install. And scaled spend after also seeing a cost per purchase that outperformed benchmarks by over 70%.

Shopping on Reddit continues to be an exciting opportunity. Building on our dynamic product ads road map, we launch an alpha test of shopping listing ads. This multi-advertiser product carousel matches product catalogs with high intent shopping conversations, which are growing 40% year-over-year on Reddit. The format expands our performance offering beyond single advertiser catalog ads and is designed around the way people compare products and make purchase decisions on Reddit.

Now turning to measurement. We made important investments in our first-party tools while third-party research further validated Red it's impact and strengthen our position within the broader ad measurement ecosystem. In Q2, we launched dual attribution in data giving app install objective advertisers better visibility into Reddit's role throughout the consumer journey beyond what standard last touch models may capture.

With dual attribution, we combine our first-party attribution signals with existing mobile measurement partners signals to of our ML models, campaign optimization and advertiser outcomes. Third-party research is validating our impact across categories and geographies. Research from attain and Sircana found that Redid delivered 1.5x higher return on ad spend for CPG advertisers than other social platforms on average across the U.S. and Western Europe.

The research also showed that Breit Shoppers generated higher lifetime value across categories, including food, beverage and personal care. In another study, TransUnion identified Reddit as the most efficient paid social channel in EMEA for retail advertisers, driving an average 7x higher ROA or return on ad spend with 13% of Reddit's impact also lifting other marketing channels.

Lastly, I'll discuss how we're expanding the Reddit for Business ecosystem. We're building more always-on relationships and making it easier for advertisers to scale their spend on ready through our ad API and credit lines. Ads API revenue grew over 40% from Q1 and more than half of our revenue comes from credit line relationships. Our Shopify integration became generally available in May, and more than 500 accounts are now integrated with strong activation rates and average revenue per advertiser.

We now plan to focus on improving the Shopify product experience acquiring merchants and increasing dynamic product ads adoption among Shopify integrated clients. Overall, this was another strong quarter for Reddit. our commercial momentum reflects both strong execution and the differentiated value of the Reddit ecosystem, which is helping our partners generate consistent and durable outcomes. Thank you for joining us and for your continued support.

Now I'll turn the call over to Drew.

Thank you, Jen, and good afternoon, everyone. The financial headline from a strong Q2 is that Reddit's consistent revenue growth continues to fuel compounding growth in cash flow and profitability. Specifically, Reddit grew more than 60% for the eighth consecutive quarter, while operating cash flow, adjusted EBITDA, net income and GAAP EPS, all more than doubled in the quarter year-over-year. It's not often most key profit and cash flow metrics double year-over-year.

These results speak to the fact we continue to maintain a healthy balance between growth and profitability. Q2 was our fifth consecutive quarter where revenue growth -- our revenue growth rate plus our adjusted EBITDA margin was over 100%. And we're converting that strong growth and margin into cash. It was great to see we crossed $1 billion of operating cash flow on a last 12-month basis for the first time. I'll now provide more color on our Q2 results.

Q2 revenues of $805 million grew 61% year-over-year, driven by ad revenue of $760 million, which grew 64% year-over-year. Other revenue reached $43 million, up 24% year-over-year. U.S. revenues were up 56%. International revenues were up 84%. Average revenue per unique user grew 36% year-over-year to $6.18.

Moving to expenses. Total adjusted costs and expenses, which include both adjusted cost of revenue and adjusted OpEx, were $462 million, up 39% year-over-year that very consistent with the 41% rate of cost growth we've seen over the last 4 quarters. Gross margin was 91.3%, up 50 basis points versus last year. We saw margin tailwinds from incremental revenues and hosting efficiency programs offsetting the increased use of compute, including higher AI and ML usage.

In the quarter, cost of revenue was $70 million, up 53% year-over-year, which includes thoughtful investments we're making in such areas as machine learning, site performance and safety and ad targeting. Now operating expenses remains the far larger piece of our adjusted cost base. It's more than 80%. In Q2, we saw 2 positive takeaways. One, adjusted OpEx was $392 million, 49% of revenue compared to 57% last year. So we continue to get cost leverage.

And then second, as Steve mentioned, we crossed $1 million of revenue per head count on an LTM basis for the first time. This was an important North Star we set at our RPO, and a positive signal of an increasingly more efficient and more effective team here at Reddit. On hiring, we added about 100 people in Q2. We evaluate resource needs with an ROI mindset, focusing on clear opportunities to improve the consumer product, the ad stack and coverage of advertiser accounts.

We view marketing spending as an important enabler to reach our bold North Star goals of 100 million U.S. users and 1 billion worldwide DAUs. In the quarter, overall paid marketing results were mixed. We did see some encouraging signals with our newly launched brand campaign called People are the Best, but user acquisition spending needs stronger attention to improve returns. We'll continue to evaluate the mix of our spend moving forward.

Overall, in Q2, total marketing spend was slightly higher sequentially on a percentage of revenue basis across both paid and brand marketing. Finishing up on costs, stock-based compensation related taxes were $107 million or 13% of revenue, well in line with benchmarks. SBC was sequentially higher, primarily driven by the timing of our annual grant, which happened in Q2. Even with that timing impact, dilution remains manageable.

Total fully diluted shares outstanding were $207 million, up 0.3% sequentially and up 2% year-over-year on a net basis considering share repurchases, which became a more meaningful tool this quarter. We repurchased about $235 million worth of stock, about 1.5 million shares at an average price of around $157. We have about 100 -- excuse me, $760 million left on our current authorization. Sequential dilution was up 0.3% on a net basis and 1% on a gross basis, excluding the impact of share repurchases.

A couple more financial points of interest. First, income taxes were slightly higher in Q2 than the prior year, but the effective tax rate remains modest. Net income was $253 million, $1.31 per basic share, $1.25 per diluted share, multiples more than the $0.48 and $0.45, respectively, from a year ago. Operating cash flow doubled from $111 million last year to $262 million this year, while CapEx was $1 million and less than 0.2% of revenue. So still very light.

We ended Q2 with $2.8 billion in cash, cash equivalents and marketable securities, up over $700 million from a year ago and slightly higher sequentially as cash generated from operations was mostly offset by cash used for repurchases.

So now turning to the outlook. We'll share our internal thoughts on revenue and adjusted EBITDA for the third quarter, and then I'll cover a few additional items for the back half of the year. In the third quarter 2026, we estimate revenue in the range of $860 million to $870 million, representing 47% to 49% year-over-year revenue growth with a midpoint of about 48%. The adjusted EBITDA in the range of $385 million to $395 million, representing 63% to 67% year-over-year growth and an adjusted EBITDA margin of 45% at the midpoint.

The Q3 guide reflects continued momentum in the business, which also takes into account our current investment plans. I'll also share an outlook for stock-based compensation, we are lowering our full year expense guide for SBC from the high teens as a percentage of revenue to the low to the mid-teens as a percentage of revenue. To date, we've seen good leverage on this expense and it's less than 13% of revenue to date, down more than 1,000 basis points versus the first half of last year.

In Q3, we do expect SBC and related taxes to elevate to be between $140 million to $155 million as prior grants at lower share prices vest and were refurbished with grants at higher share prices. We also expect our full year dilution to be at the lower end of our 1% to 3% targeted range. This is before considering any additional factors like buybacks, which would lower the number further or acquisitions, which could increase that total depending on the scale of the deal and the cash stock mix.

Additionally, as we announced earlier this year, Q2 will be the last quarter we report logged in and logged out user metrics. In Q3 2026 disclosures will continue to report total U.S. and international daily and weekly active users, but will no longer report logged in and logged out daily active users. As we move forward, we'll continue to assess our user reporting and will ensure it reflects how we look at and run our business.

So to summarize, Reddit continues to scale in a one-on-one way. Most of the major profit and cash flow metrics doubled in Q2. Revenue and monetization continued to grow at a differentiated pace. Margins remain strong. CapEx was light, and we began to deploy capital in a more meaningful way. It's particularly encouraging to see the way cash flow is scaling. As I mentioned upfront, on an LTM basis, Reddit's operating cash flow crossed $1 billion.

We have liquidity and cash capability to satisfy our 3 capital priorities, which is first investing in the business; second, opportunistic M&A; and third, share repurchases while maintaining a high level of profitability. That concludes my comments. Let me turn the call back over to Steve.

Thanks, Drew. Before we turn over to the group for questions, let me take one from the Reddit's stock community. The question is, what's a memorable conversation and moment you had at Cannes. Let me give you a couple. The first thing that came to mind was one of our brand ambassadors, I had to clear up that, yes, I work here and no, I'm not 28, the second more business focused is, without naming names, I had a couple of meetings with brands that we've wanted as customers for a long time.

And it's just more of the same trend. More and more folks are really starting to get Reddit and understanding how important it can be to them. So really encouraging there. And then overall, I think I'd love the way our team shows up. We did, I think, over 500 meetings and that just about all of our customers or all of our large customers. And so it's just really encouraging to see folks, I think, really appreciate what we're trying to do. Thanks for the question.

Julien, let's open the line up for questions from the folks there.

[Operator Instructions] Our first question comes from Tom Champion from Piper Sandler.

Very strong quarter commercially. Jen, what drove the strength in the ads business this quarter? And then for Steve, as you think about 2Q and early 3Q, what do you want investors to understand about the trend in user oath and your ability to drive high-quality users to Reddit?

Thanks, Tom. I'll take the first question. Look, I think it was another strong quarter. You see the consistency in our business. Number one, I think our message is resonating with advertisers broadly. I mean our influence in the purchase decision journey, I think, is clear. And the -- I think increasingly, they realize that their customers are putting an increasing value on human advice and Reddit is the place for that. So they realize how important our environment is.

We continue to deliver like market competitive outcomes. And our strategy, I think, just continues to build momentum. Like our strategy has been making every impression more valuable. When you look at the volume of conversions growing and clicks growing, what that means for an advertiser is that they're getting more outcomes and equal or better prices. So we're just getting more competitive with all of the signals, ML work and Opto work that we're doing.

The other piece that I think is really kicking in is very strong adoption of our tools. So this is making it easier to onboard advertisers. So this is why you see advertiser growth, like 70% year-over-year because we're able to make it easier to onboard advertisers. We're then delivering more efficiency, which retains them and allows them to scale spend and then we're making it easier for them to stay always on with more credit line adoption taking friction out of working across the funnel.

And then finally, what I'll say is like I think our business is diversifying across so many dimensions that it's made it really resilient. So you look across verticals, like 11 out of 15 verticals grew over 50% year-over-year. Our active advertiser count grew over 70%. Our scale channel, which houses mid-market and SMB, doubles, Rest of World grew 80% plus. So our footprint is just getting so much more diversified, which makes our business also very resilient and flexible.

Okay. Second question, Tom, thanks about users. So as we said last quarter, our goal is to achieve 1 billion daily users globally at $100 million in the U.S. There's no change there. Credit is a destination. And in the U.S., we have nearly 200 million users coming every week, and we primarily grow through our product work, and that's how we drive daily direct users, and we're making progress there. And we added through that product for DAU in the quarter, but it was offset by a decline in search referrals. So first, on the product, we improved new app user retention. This is one of our most important metrics and priorities. It was up 50% year-over-year on a relative basis. We grew our reach. We crossed 0.5 billion weeklys. U.S. and international weeklies both grew sequentially.

On the contribution side, we made it easier to find a post in the right community. So there are now 26 billion posts and comments on Reddit with 1 billion added since Q1. And our thriving communities are growing significantly. And we're more effectively converting web users into higher-value app and direct users, and we saw success with video and comments, which is expanding our upper funnel.

We did see headwinds in search referrals, particularly late in the quarter and visibility with the referral traffic remains low, but we're focused on what we can control, which is our direct users, driven by product efforts, and we believe this work will be transformational. It will take time, but this is how we get that 1 billion global 100 million users in the U.S.

Our next question comes from Ron Josey from Citi.

Maybe to follow-up to Tom's question. And Steve, you mentioned in the letter that growing DAU is top priority. I know you just talked about app usage and the quality of the traffic. But talk to us a little bit more just around the product that can convert, call it, the pretty strong WAU growth to be us. And particularly, I wanted to hear more about the focus on the feed, and then there's been a lot of articles and reports just about the data licensing partnerships that you currently have. Any updates on strategy as you approach this or anything as we get closer and closer to, call it, the renewal rates in early 1Q for others.

Sure. Thanks, Ron. So on on users. Yes. So focused on the WAU to DAUs would be an increase in frequency. We drive that primarily by making red more sticky. You mentioned the feed. I think over the short, medium and long-term improvements to our feed will improve that frequency. I think there's a lot of headroom there. If I -- to be frank, I think our feed technology is just behind the state-of-the-art, which gives us a lot of headroom to catch up. And I'm particularly encouraged at the talent we're bringing into Reddit over the last quarter to help build that next generation of feeds.

But all the little stuff works too. So we did a unto experiments in the last quarter and many of them worked on their path to GA of just kind of chipping away at retention and quality, which drives that growth. And so this is in onboarding, this is in posting, this is in performance across the app. So we're really starting to feel that momentum.

And then I mentioned conversion, right? So this is taking that big top of funnel web user base we have and converting those into mobile app users. We've been dialing that up as well and driving more downloads. And those users, many of them are already ready users and they retain quite well and do even better in the app. So we're seeing a lot of progress across the board there. And I think, again, a lot of headroom. On data licensing, no change in strategy, working hard. Reddit's content is in demand and it's not commodity content.

People seek it out intentionally by name and many come directly to Reddit. Our relationships here are multifaceted. So read it for its use for training, it's used for post training, to teach models how to talk, it's used for grounding, it's used as a search index. And so there are many layers and dimensions for how this can work. Redistata is valuable beyond just raw training data. And these deals aren't binary. They have to make sense for Reddit, but there's many ways, I think, for the value to return to Reit. But our goal is to maximize the value return to Reddit.

Our next question comes from Rich Greenfield from LightShed Partners.

Steve, I don't want to belabor this point, but your stocking is down sharply because there's just a sense from investors that you have -- I don't want to be blunt, a user problem, especially in the U.S. that users are -- it's only a slight tick down, but they're ticked down despite all the investments you've made over the last year. And I certainly hear you on the weekly improvement, but people are looking at the daily and saying, the log down traffic is going to be under pressure because as search shifts to AI, you're not going to get referrals and that it's going to be harder to get people to go from logged out to log in, and that sort of symptomatic of what you're seeing.

And so you're buying back a lot of stock. You don't seem concerned -- or you and Jen seem very confident, Jen and Drew seem very confident. I guess what gives you so much confidence that you're going to grow to 100 million logged-in users in the U.S. and 1 billion globally versus the slight tick down this quarter because there's obviously a big disconnect, and it's obviously impacting your stock.

And then just the second piece of that to follow up on Ron's question. Do you see any world where you're not licensing data to Google and OpenAI next year?

Okay. Thanks, Rich. So look, let me start with the end first. We are confident because our product work is working. Reddit is communities and conversation, communities are universal. And so we think we have in the U.S., content for everyone and it's a matter of revealing that. And we're making progress towards that end. Moving new user retention in the app this significantly in a quarter is something that we're very proud of, and that sort of improvement in retention drives growth, and that is work that we're in control.

Yes, search is -- external search is volatile, particularly logged out web, but that's not where our business lives. And we will make sure that we get as much value from that traffic as we can. And so that's where we've been driving conversion to a and that's become more effective as well. So long term, we are as confident as ever that we're going to get to those milestones that we've set. But the work does take time, and we do have a lot to do in the product. But driving that direct growth is in our control, and we're seeing some progress there.

Is there a world in which we don't do licensing? Well, I think the range of outcomes is wide and we have to look at every aspect of this and make sure that we're maximizing value to Reddit.

Within Google, it's not just licensing. There's -- and our relationship with actually predates the formal and the data licensing agreement. Our long history in 10 Blue Links and now the replacement and AI overviews alongside licensing. And we've also seen this development in -- or an expansion of how Redis content is used both with them and others. So I don't think there's a binary outcome. I think all of these different touch points, whether we're talking about training or blue links or AI overviews or whatever comes next, those are all independent decisions.

And we will make sure that we're maximizing the value for Reddit. But for us, it's not just traffic or clicks. We want users into the Reddit ecosystem, right? Reddit a community and conversation product. And so we want to bring users into that ecosystem and that flywheel of Reddit. And so that's what we're looking to do in any of these relationships.

No, there are more buyers of that data than just Google and OpenAI in your mind?

Of course. One of the things that we've seen over the last year is more and more people interested in Reddit's data for different use cases or at different scales. And so we do look at this as an expanding marketplace with lots of different opportunities.

Our next question comes from Mark Mahaney from Evercore.

Two questions, please. You talked about these headwinds and search referrals late in the quarter. Just put some context around this. Is this something that just pops up from time to time. Were those headwinds greater than what you normally see less than what you normally see? Any interpretation as to what caused those referrals? And then just back on the licensing, please, any expectations you want to set as to when we'll get -- you'll get -- will get resolution on licensing by the end of this year, halfway through next year? Anything like that?

Thanks, Mark. So on the traffic, yes, so the search ecosystem continues to evolve. We've seen changes like this before. I won't comment on the magnitude, but I think what I've said before is this is not our first rodeo. And I've used that phrase on these calls before. And so we do see these changes. Specifically, like we don't typically get much insight into what's going on. In this case, we've seen a couple of different aspects to it. One, we saw a decline in our machine translated content. So this is part of the volatility on the international side. Machine translation remains a useful strategy within our app for new users, right? So we have content to show them.

And then with the evolution towards AI overviews, I think more broadly, what we see is Pen BlueLinx has driven tremendous value and growth to the broader ecosystem. From where we sit, AI overviews has yet to make a similar level of positive impact, and I think that's consistent across the broader landscape, right, us, businesses, publishers, retailers. But we're still looking for that win-win, but our visibility on search continues to remain low, and we expect it to probably continue to be volatile.

So what we're focused on is making Reddit a destination and driving more direct traffic to our app.

Our next question comes from Justin Post from Bank of America.

I'll try a different topic. Jen, you think about where you are in the U.S., you did over $20 in ARPU in the first half, approaching 50% for the year. How do you think about where you are with ad loads, auction density, advertiser ROI? Is there still room to grow that significantly from here on your user base. And then maybe one for Drew. How are you measuring the returns on your marketing spend?

Yes. Happy to take that. Look, I think we still have a lot of ARPU headroom because I look at our road map, and I see lots of ways that we can continue to deliver value for our advertising partners, i.e., more outcomes at more competitive prices. And if you look at -- we're a marketplace, right? So what's great about a marketplace is that you can have this demand driven as well as performance driven. So there's a lot of flexibility in the marketplace for the market to meet each other in terms of the supply and the demand.

I do think that when I think about the headroom that we have, it will be driven by, I think, a lot of the outcomes across the funnel. So if I had to give you where I think we're driving incremental value to advertisers today. It's that 6-second guaranteed video view is incredibly valuable. It's been a really nice performing product for us. And we're being read it with high intent, we intend to go like deep on that view, and that's a really high-quality, high-value view.

Obviously, the volume of conversions, the volume of app installs, the volume of leads, this is an area that will continue to do work. So I feel really good about our ability to continue to drive our strategy, which is to make every impression more valuable. And as long as we do that, I think that continues to fuel our business. and continue to fuel our ARPU.

Justin, the primary metric we use to evaluate marketing spend is really a very straightforward cash model, P&L based, looking at a kind of acquisition of a user or the cost of the user looking at the retention of that user, the monetization of that user netted out over a pretty short time frame. So overall, it's a pretty consistent with, I think, across the industry. give you a real straight value. Once in a while, we'll look at the balance sheet value. We'll look at the value of a user overall. But mostly, it's a very straightforward kind of ROI-based quick payback model in the short term. That's how we think about it.

Our next question comes from John Colantuoni from Jefferies.

Wanted to come back to engagement. As you look to continue driving engagement, how do you see that impacting the experience for users on the home page versus in sub-Reddit. And could you see the feed looking more like some other social platforms that are doing good job marrying machine learning and video content.

And second question, maybe just on Reddit to answers and search. Can you give us an update on engagement trends within search and where you are in launching a generally available advertising offering on that surface.

Okay. I'll take the first two and maybe Jen coming on the other. So thanks for the question, John. So in terms of engagement, distribution across the app, even today, the primary surface is the home feed versus sub-Reddit. And so this is why it's such a self-service, and this is why we our surface and why we see so much headroom in improving our performance there improving the technology that backs that feed because it does a lot of the heavy lifting of juggling user sub-Reddit, and it's one of the primary drivers of sub-Reddit discovery. So I expect it will continue to do much of the heavy lifting.

You're touching on something we're working on right now, which is how do we show video in the home feed. This has been something on our minds to getting this right, especially as we have more and more video content on Reddit. And so there's 2 aspects to this. The first is, just generally, how do we make video work in the feed because it's such a mixed media feed, right? You've got video, you've got text, you've got images.

So those flows between -- from feed to theater mode to the comment page back to the feed are essential. I think I know there's a lot of opportunity in improvement there. We're working on, I think, some things that really streamlined that and help.

The other thing we're working on is just a video Reddit experience, so letting users not just watch video on Reddit, but listen to posts, background listen to post. We see folks doing this off platform. There's an emerging content type elsewhere in the Internet of basically, a podcast where people read Reddit content. And so I think this version of like listening to are spoken edit can be really engaging as well. So that would be almost a different format entirely. So there's a lot of things that we're working on now that I'm looking forward to testing later this year.

On answers on search, we're making steady progress there. The search bar is not universal within the app. We grew both searchers and searches in the quarter. And I think a queries -- for many queries that I run at least Reddit is now the best platform for searching Reddit. That hasn't always been the case. And so we're chipping away at that. But I think any query where you want to know something or want to see multiple perspectives like what should I watch? What do people think about this? What should I buy? Reddit is -- provides the best answers on the Internet. So I'm really encouraged with the progress there, and we're starting to look towards ads on that surface, which I'll turn it over to Jen to address.

Yes. So search is in a space where it's very married to like a shopping experience. And so we -- there's a couple of different angles to this. One is that we think that the search page can be enriched with more like rich media modules. So it can have product visuals from the catalogs that we have when people are switching or discussing or a specific product. And we started to do that. We had done a test earlier on electronics and consumer electronics and now we've expanded those categories. And so that enriches core search experience and hopefully increases engagement people get more out of that experience.

And I do agree with Steve, that I think especially the agentic ask function on Reddit search, I think, is now the best way to search redid. The second is what goes along with that engagement at the product level when you have a match is at, right? So I talked about our shopping listing ads where you can have a module that has multiple different retailers and product types and brands in one module. That's a great sort for a search page. And that's ultimately how I think ads would be well represented on search. So that's a space that we're eyeing.

We clearly have the capability to do it. We keep tracking as the page settles and as users adopt that, we will -- we do see an advertising opportunity there. And the good news is we have the infrastructure, and I think a lot of that capability already queued up.

Our next question comes from Josh Beck from Raymond James.

Maybe more of a multiprong on the product side. So the new app user retention, you certainly highlighted as an area of early success. I think you said it was up maybe 50% year-over-year, a small base. But just kind of curious specifically what unpack that. And I assume that's part of the confidence in the product work that you have moving forward. And then on the fee models, I don't know if you can maybe give us some type of or view into the drivers. Obviously, there's a lot that goes into building these models between retrieval and ranking and serving and refresh and there's million different parameters, and I probably don't want to get to too much detail, but just kind of any sense can you give us on maybe what are some of the the specific areas you're focusing within the feed improvement?

Sure. Thanks, Josh. Okay. New app user retention. Yes, 50% on a relative basis, which it's a hard number to move, and it's one of our most important. It's, I think, our best measurement of product quality. So to users opt it and then want to come back the next week. So that's what we've been moving. There's a number of factors here. One of the biggest is conversion. So we're basically taking core users or frequent users from the web and turning them into app users where they become even better users. And we have a lot of those.

Second is within the app itself. So onboarding is much improved. So more effectively connecting users to their home on Reddit. Some of the in the trenches work around log-in, account recovery, preserving log-ins after reinstalls all of these things add up and have pushed this number higher. I think both the new retention or the new user retention on an absolute basis has still a lot of room for improvement.

This is what we've been talking about for years. Once users get Reddit, they really get it, but it can be a hard product to get. And so every time we make it easier, we grow. And so this is the healthy mix shift we've been looking for, and I can start to see the momentum. That's why we're confident.

On the feed, you're right, we could talk about this all day. I'd say broadly, our the models we use today are smaller than state-of-the-art, significantly smaller. So we can scale up the size of the model. Our model is update slower. So days and not instead of versus state of there, which is hours or minutes. And the amount of our like user activity that we actually incorporate into the models is like 10% of our user activity, where that could be significantly higher.

So basically across the board -- in our the category set, the candidate set. So posts that are eligible for recommendation, Reddit right now is limited to a week. So Reddit is basically a -- our feed is almost like a real-time feed where we have this actual mass of corpus. Much of that content is timeless.

So think about things like parenting advice or book or movie reviews, things like that are relevant for a very long time. We don't show this on the feed at all. So we can dramatically improve candidate selection, model size, model speed, the signals that go in from users, pretty much every dimension. We have sometimes order of magnitude improvement opportunity.

So we'll be doing that work over the next year, and I expect every improvement we make to work because we're just starting from such a low base.

Our next question comes from Andrew Boone from Citizens.

Jen, I wanted to ask about SMB. You guys have Shopify coming on board. It sounds like Max is doing well. Can you just unpack the success that you're seeing with SMBs? And then what should we be thinking about as we think about the back half of the year in that group? And then Steve, just going back to engagement. If I think about the feed and platforms that are scaled, everyone kind of has a creator ecosystem that's kind of gone to that 1 billion user level.

Do you guys need to do anything different in terms of the content that's on the platform to really get to the scale? Or do you guys think you have what you need today?

I'll take the question on SMB. So this is a segment that's been growing really nicely for us, but there's just still thousands and thousands of SMBs globally that aren't yet on our platform. A couple of things. We continue to acquire into this channel. And obviously, Shopify is a partnership that allows us to do that. We'll be doing some joint marketing efforts to accelerate the acquisition now that we have the capability to sync in catalog and have Cappy integrated into Shopify automatically from Shopify merchants. So we'll really be ramping up sort of that co-marketing effort.

The second is, the onboarding to SMB today is not the optimal onboarding with Max. We're still doing the foundational work on what is the right entry point for SMB that takes out more friction that is more tailored to their needs and that allows them to onboard and enjoy Max faster. So that's to come, that's ahead of us, but we think that, that will be really important for reaching more acquisition -- smoother acquisition, ramping of acquisition as well as a great experience faster on our platform.

So those are the things that we have in the hopper against SMBs. Obviously, SMBs also benefit from all the horizontal work we do generally making all of our objectives more efficient, that everyone benefits from that. So I mean I feel really good about the momentum in our SMB business. But I think there's a little more tailored product work that we want to do to -- for this customer set.

And then on the creator ecosystem, there's a lot of progress that we made in this quarter. So post per logged in DAU, comments per logged in DAU, globally and in the U.S. are all up as is thriving communities. And there's a lot of work behind us. So we've got a new post composer on both mobile and web. So it's easier to post, new comment composer, we're better directing users to which sub-Reddit they will be successful hosting it, making better community recommendations.

And we're also working on what I think is one of the biggest opportunities, which is post success. So making it easier and more consistent for new users. One of the challenges right now is new users are likely to have their posts removed because their account isn't old enough. These are kind of long-standing strategies that have not aged well, and so using LLM assisted moderation, we can help bring in the perspective, great user and continually get better at keeping the spammers and other bad behaviors out.

Video in comments is a new feature. That's already more than 10% of our video posts is from that feature. And so we're seeing nice engagement there as well. I do think our creator ecosystem will look different than what you see on other platforms. The way I've often described it is the social media platforms are for the 1% of creators and Reddit is for everybody else.

Our view is that everybody has something interesting to say, even if you're not a professional contact reader. Everybody has a question. Everybody has a need everybody has a bit of advice to give or something interesting to share, and that is what Reddit is for. And so I think of social media, there's a lot of professional content creators and Reddit is for everybody else, but making it more making Reddit easier to post to and increasing the post success rate for everybody is the name of the game for us, but we made some nice progress this quarter.

Our next question comes from Benjamin Black from Deutsche Bank.

Just a follow-up on marketing spend. It does appear just given the ARPU that you're generating per user, that the ROI on that spend should be quite attractive. So I guess the question really is, why not spend more? What you seeing in terms of the retentiveness of the users that you're bringing through some of these trade channels? And what could you do to improve it, I guess. And then Drew, incremental margins have remained exceptionally strong, as the company continues to scale, where do you see the largest remaining opportunity for operating leverage over the next few years?

Good. Let me take that one. Look, on the marketing side, look, we think that marketing is a very important piece to get to our full goals. Like that's really important. We certainly want to continue to do user acquisition spending. I spent a minute talking to Justin about what our model is pretty straightforward model. I think it's very similar to other folks in the industry. I think the key unlocker there is we just need better user retention. As Steve said, we're up 50% this quarter that's starting to speak to the product work, but there's still more work to do. On a relative basis, we're lower than others in the space. And so we're going to try it.

I would say on the marketing side, we did launch our people as the best -- people are the best campaign this quarter. That would really that really took some things up. We had a lot of positive press from that. And I think the more that we can balance the user acquisition growth with the user acquisition spending with brand spending, I think we'll end up in a better place.

And so I think, overall, we're committed to the spend in the marketing area. We think the brand will benefit from it. like to continue to invest through it. I think there's dialogues about how do we maybe spend a little bit more on the brand. But overall, I think we're -- I think the real unlocker on just getting more UA spending would be just better retention. It is that simple. We have a great model from a gross margin perspective.

So an incremental user here is worth a lot. You're pointing out the ARPU, it's very high. Those are two things that are terrific here. They should really help us just need a little bit more from the retention and we could really move on this one.

Your second question was around the incremental margins. Look, you're right, we've been running incremental margins in the high 50s, low 60s for the better part of a couple of years. The incremental markets here are powerful. We don't manage the business for incremental margins. We look at individual ROI on investments. I think we continue to be very fortunate with the incremental flow-through here.

When we get incremental revenues, you really can, particularly on the gross margin line, you can flow those between 95% and 99%. And so that's how I really think about incrementality. And then it's just a question of what investments that you want to make. I mean, I think right now, we make the investments that we want to make we don't hold investments back because we say, well, geez, we need the incremental margins here to stay in the high 50s. That's not the way the company runs.

We really look at individual investments. Where it makes sense, we put the money behind it, and we go ahead and do that. I think we've had a lot of success with our investments. We've invested a lot in the ad tech stack. You can see that results in the monetization. We've invested a lot in our sales team, you can see 8 quarters in a row of 60% or more.

So those have been two of our probably more prominent investments. As Steve mentioned, we're investing a lot on the talent side to bring in machine learning talent and really just upgrading our growth team in a meaningful way. So those are investments we make. We make those investments that's right. I do think the margins continue to accrete here. The long-term goal is 50%. And so that's what we're focused on right now.

And I think most of that will come from just leverage off of incremental revenues. There aren't huge pockets of costs that we're sort of staring at right now and say we could take that out. That would be my take on your question.

Julianne, I think we have time for one last question.

Our last question today will come from Jason Helfstein from Oppenheimer.

I'll just ask one. So you're obviously calling out the importance of we'll call it like a high-quality user app user logged in probably a lot of different ways you think about high-quality user, but is the takeaway that you want us to view here as well, you may be hurt by referral traffic that is a high-quality user work kind of, I don't know, multiples of, let's say, what 1 like referral traffic. So it's not necessarily equal. And so while the Street is focused on, okay, you're down 300,000 DAU sequentially, U.S., the idea that you can offset that over time with your mix of higher quality use. So maybe just elaborate more how you want us to think about the importance of a high-quality user and maybe other metrics will share about that in the future.

Thanks, Jason. I think you've got it exactly right. The direct users, the app users are worth multiples more than the search referral traffic. We're not building Reddit for that drive by traffic, we're building Reddit for direct usage. And that's where our business lives. And you can see that in the performance of our ads business, right, despite search volatility, and we've seen volatility like this many times in the past, our revenue growth has been very strong and consistent. It's because our business lives with those direct repeat users and growing that base.

And both through our conversion efforts and retention efforts. I think we've made nice progress this quarter, and that's the work that we can control regardless of what happens in the broader search.

All right. I think that covers it. Thanks, everyone. We appreciate you joining and look forward to speaking again soon.

This concludes Reddit's Q2 2026 earnings call. You may now disconnect.

Very pleased to have Steve Huffman here from Reddit, CEO and Founder. And we're going to go through a lot of big picture questions we get all the time, some concurrent events and then some business model questions. And we also have questions from Reddit audience. So I think it should be a good discussion. So thank you so much for coming.

Yes. Thanks, Justin. Really glad to be here.

Great. Why don't we just start off with you? What do you spend most of your time doing? And what are some of your priorities right now?

So the big goal for Reddit -- well, if we start with our mission, right? Our mission is communities for everybody. So -- but to make that more concrete, we really think about how do we 10x our user base, how do we 20x our revenue. So how do we get to 1 billion global DAU? And on the path to that, I think our most nearest-term milestone is how do we get to USD 100 million DAU. So broadly, we're thinking about people and products. So we've been going through, I think, a big evolution over the last year, making really some foundational changes to our teams. So at the end of the day, great products are made by great people. And so it's been kind of just a constant evolution of Reddit of just upgrading our team, so whether we're evolving ourselves or bringing in outside folks, but just to have the absolute best team possible, so we're going to have the absolute best execution possible, so we can have the absolute best product possible.

And then on user growth, look, our core product works amazingly well for our core users. But Reddit can be a product that's challenging to get. And so our work there, I don't know if it's sexy, I find it very interesting, but really just improving the quality of the product. So the ease of use, the performance, just increasing the likelihood that a new user is going to find their home on Reddit. That is how I think we drive kind of durable compounding growth. And then for us, revenue -- look, revenue has grown 70% for the last couple of years, been very consistent. I think we can very reliably turn users into revenue in a healthy way. So all roads point to us just growing users within our core product because the core product and the core business is working very well.

Great. Let's dive into users a little bit. It's a big question we get. And you have a huge broad user reach in the U.S. But how are you thinking about turning those weeklies into dailies? And anything new? I know you've been working on it for 18 months now. And what are your big initiatives right now to drive frequency?

Yes. So weeklies and dailies, themselves are both important measures of Reddit. But if we look at within our U.S. traffic, we have about 200 million U.S. weeklies and about 50 million U.S. dailies. And so when I think about that path to 100 million U.S. dailies, so roughly double from where we are today, I look at the potential of the 200 million weeklies we already have. And so if we think about the kind of 3 aspects of growth on Reddit. So reach is like the total scale. So already in the U.S., we're at 200 million weeklies, but how do we grow that to capture more of those as daily users. Frequency is the one that we're really thinking about right now. So how often do users come to Reddit every week. And so if you were to look at a histogram of how many days active a user is on Reddit, the 2 biggest bars would be 7 days and then they come every single day, 7 days a week or 1 day. And so quite simply, our job is to convert those 1s into 7s. In between, there's actually not much. But that journey can be challenging. So really increasing the reach there.

And then depth, so this is how much time people are spending on Reddit. I think we're actually a very healthy spot here. A U.S. logged-in user spends on average 30 minutes a day on Reddit. And the older their account is, the more time they spend on Reddit. So a seasoned account spends more like 50 minutes a day on Reddit. And so again, this kind of tells the same story [indiscernible] once users get it, they actually go deeper and deeper over time. One of the ways Reddit is different than social media is our users don't age out of Reddit. They age out of social media and then they age into Reddit. But because Reddit communities cover everything you're doing or thinking about from something mundane, like what should I watch tonight, right, the never-ending problem of life to relationship challenges or kid challenges, our medical maladies, whatever it is, Reddit is there with you on your life's journey.

So it's really for us that -- that frequency question, excuse me, of taking that -- the potential energy we see in our weeklies and converting those into dailies.

Got it. And what's the biggest initiative right now to do that?

Oh my gosh. Okay. I actually have an answer. So it's going to be a combination of a lot of incremental improvements to onboarding and performance and ease of use and navigation in the app. And so we're chipping away at all of these things. The biggest one will be machine learning and the feed. So Reddit is going through this transition the early version of the Reddit products or for the first couple of generations of Reddit was the front page of the Internet. So it's one front page of content for everybody. That worked when our user base was homogeneous.

But now our user base is diverse. Our content base is diverse, both great things. But one front page doesn't work for everybody. So we've been on this transition from one front page to more personalized experiences. That is the short-term, medium-term, long-term, that will be the one that's carrying the most load.

And so when we talk about in my first answer, the people on the product, the people we are bringing in are the machine learning experts who have worked on feeds -- who have worked on feeds like Reddit at scale, at greater scale than Reddit, the processes so that we can ship and iterate new models much more quickly. I think that will carry the most load. But like I said, it's also a game of many inches over every part of the product. I think of Reddit as this machine, and so we're always looking at what are the parts of the machine that have the most friction.

So if you talk to me a couple of quarters ago, I would say actually dramatically reduced the friction in onboarding. So now the success rate of users through the onboarding journey is like 80%, 90%. That's great. So now the next step is we're putting them in this feed, and now we can see that feed really needs to level up as well to help users through that whole journey. And I'm guessing if we talk in 6 months or a year, I'll be talking about content creation or community creation, the next parts of the machine as we look to the future.

Got it. I have one from the community. I want to read this so I get it right. Steve, you have a very passionate user base in your Reddit communities, and many of them are also shareholders. They think that your business is doing really well, but sometimes the stock price doesn't reflect that. Do you have any thoughts on that?

I do. I'm mic, so I can't share my thoughts. Okay. So look, I'm so grateful for the shareholders and our user base. It's a literal dream come true. One of the reasons we went public was so that our users could be shareholders. They feel this deep sense of ownership over Reddit, right? All of our communities, all the content, everything interesting about Reddit is created by our users. And so I wanted them to have opportunity to be real owners. There's a community on Reddit called Reddit Stock. That's where the shareholders hang out. I see every post in there. Good, bad and the ugly. I read everywhere.

So to answer the question, you're right, the business is doing well. I think we've had very consistent growth, like I said, 70% revenue growth over the last 2 years, over 90% margin -- gross margin, profitable on a GAAP basis. I think doing really well. I think we're really proud of the business returns. Look, I think if you look over shareholder returns over the long term, I mean, since we IPO-ed 2 years ago, we're up 5x. And we do take a long-term view of our business and shareholder returns. But we also get -- we've been higher than we are right now.

I think there's many reasons for this. I think the biggest one probably is just uncertainty with AI. So we catch it -- I think we catch it from a couple of dimensions. One is just macro uncertainty is what's happening in the economy, what's happening in the world. There's a lot of that. Of course, I think we and many others sit downstream of that. And then uncertainty specific to people in our space, right? Do you get disrupted by AI, displaced by AI. So if I work through these things, we've got a great business. Reddit is, I think, from a business performance point of view, one of one company. If you look at the revenue growth, the gross margin, the EBITDA margins, cash flow, we're very proud of our work there.

And then when we think about the AI uncertainty, I'll just point to a couple of things, which is humans always want to talk to other people. And in fact, I think in the AI world, there's an increasing value placed on authentic human connection and conversation. And that's ultimately what the Reddit product is.

And then second, on top of that, there are, I think, so many opportunities for -- and we're seeing it now that the paradox of AI, which is AI, as we know, it doesn't exist without Reddit, right? Reddit is used pretraining, post-training, grounding, search. So Reddit is an essential player in the modern version of the Internet. And so I think what's most important to us is continue to execute our strategy, continue to grow users, and I think we'll see this play out.

But look, I also would say that when our stock -- when we think it's a good value, we'll be a buyer as well. We've bought 1 million shares this quarter already. So I think also sometimes opportunities are presented in that regard as well.

Got it. I would say the Internet has not been a big pick this year. Hardware space is doing quite well. Maybe it's drawing some dollars. But let's go to current events. I know we've got a lot of questions on this. So what do you think about Google's product announcements at I/O? And on that topic, how do you think about your upcoming data license contract renewals?

Okay. So I was touching on this a little bit in the last answer. Look, Reddit is an essential part of the Internet ecosystem. The word Reddit is one of the most searched terms on Google. It's been in the top 10 most searched words on Google the last couple of years. Reddit has the best content in the Internet. Google is the best search engine on the Internet. I think combined, it creates an incredible amount of value for the Internet consumer. And so the Internet is better when I think that connection works very well.

Now the space is under a lot of evolution, but we recognize, I think, the importance that we play in this ecosystem. There is no LLM on Earth that wasn't trained on a -- that wasn't significantly trained on Reddit's data, including Google and OpenAI with whom we have big partnerships and including other folks with whom we have big lawsuits.

But we've seen, I think, the appreciation for this value and Reddit's position in it evolve over the last couple of years. And as I mentioned, Reddit is an essential part of pretraining, of post-training, of grounding, of search. So really of every part of the stack. And so as we look forward, I think it's really important that this and relationships like this continue to exist and thrive and we continue to evolve together. And I think it's also -- we will make sure that Reddit gets full value for what we provide to the ecosystem.

Got it. Any traffic flows or anything from I/O that was -- would change anything in your opinion? Or is it pretty status quo?

I think even without AI, right, search to search, even despite our close relationship, we don't always know where that's going to go. So I think every quarter, there are puts and takes. I think this has been a -- I think the overall story here and the evolution of search on the Internet is it's hard to say for sure where this goes. What is important for Reddit, and I think this is unique to Reddit, which is we have completely unique and differentiated content and people don't want summaries on -- I was going to say, important questions, but sometimes it's like what I call them questions with no answers.

So let me give you an unimportant question with no answer. What should I watch tonight? People want to hear the conversation. What car should I buy? Like where should I go? What's the best headphone? There isn't an answer. How do I deal with XYZ issue with my kid? Like people want to hear from other parents. And so there's plenty, I think, of commodity content on the Internet. And indeed, a few companies have been vaporized by AI, but not Reddit. And instead, I think Reddit actually becomes more and more valuable over time and people start to appreciate this, what Reddit does more and more. So we keep doubling and tripling down on our mission, communities, authenticity, Reddit being the most human place on the Internet and having confidence that however the ecosystem evolves, Reddit will be a destination.

Great. Let's do another current event, which is how do you see the competitive risk for Meta's new format? And what differentiates Reddit's model versus any other on the Internet, much less that?

Sure. So yes, the Meta released an app called Forum, which I think is just a reskin of groups. Reddit and groups, Facebook groups have coexisted for a very long time. So our moat is very wide and very deep. I think if you look at -- we predate basically every social media company you've heard of. We'll be 21 years old this summer. So if you look at our traffic graph over time, you can't see the evolution of any of these companies. You don't see the rise and fall of anything. So it's almost like Reddit -- it's not almost like Reddit is just playing a different game because it's -- there are some similarities at first, right, it's posts on the Internet. But I think the interaction and the feeling is completely different. So what other companies are doing in the social media space hasn't really had any effect on Reddit.

The thing that affects Reddit is Reddit. And so what has meant our -- driven our success in the past has been how well we're executing, how well we're meeting our own users' needs. And that will be the primary, if not only driver of our success in the future. So again, I go back to my first answer where we've got the 7-day a week users and 1 day a week users, like those 7-day a week users could use any platform. They choose to use Reddit every day. And I think that potential is there for actually every single user.

Got it. Okay. Let's move on to capital allocation. I think you already mentioned you did some buybacks this quarter. You haven't been a big acquirer over time. But how do you think about that? And you are generating a ton of cash now, so it might be a little different. How do you think about that?

Yes. It's maybe first-class problem. We are generating a lot of cash. Reddit is a very light business. And so it's a great cash flow business, which is not something I imagined hearing myself saying 10 years ago. But I'm actually really proud of the -- I kind of live in the users' product feeling side of this company most of the time. So seeing it be such a great business is, I think I'm very proud of that work.

Okay. So capital allocation. First priority is invest in the business. [indiscernible]

A lot of margin to work with.

We've got a lot of margin to work with. Well, once you give it, it's hard to take it back. But nevertheless, still hiring. We've been a modest headcount grower. So in this like mid-double digits, like kind of mid-teens, excuse me, for the last couple of years. I think that's kind of the right level for Reddit. Broadly, our management goal has been to grow revenue twice as fast as costs. We've been doing better than that, but we just want to make sure that we're staying in line there.

So first, to invest in the business, which is hiring. Right now, this is primarily ML engineers. We'll probably invest in video as the other, I think, big product area for us looking forward and sales, of course. Second is M&A. We're not a big player in M&A or haven't been historically. We've done tuck-ins here or there, but it is a muscle that we're developing or want to develop primarily for people and technology. So it's really another way of looking at investing in the business.

And then third would be buybacks. And as I mentioned, we bought 1 million shares this quarter, and we'll keep doing that as the opportunities arise. But I think we're in a great position where I think we can fund all of the hiring we want to do. We can fund the M&A we're looking at and we can afford to do buybacks because Reddit has so much cash flow.

Got it. And then dovetailing into that, just the financial model. What do you think makes it unique? And you've got gross margins that are better than pretty much every company I cover. So how do you maintain that? And what do you think about the financial model?

Yes. So it's revenue growth, 60% or more for the last 7 quarters, gross margin over 90%, GAAP profitable. So truly a [ one-f-one ] company in that regard. And I think it comes down to a couple of things. So I mentioned before, we've been modest on hiring. And so I think that's the #1 management lever is just being very disciplined about how fast we grow headcount because that's really talking about -- that's really growing costs.

Two, our CapEx last quarter was like $1 million. So we're just not a big spender. We're not building data centers. I'm grateful for other companies that are doing that. They build the data centers. We rent the GPUs. And so that model has worked great for us. We are -- our platform is lightweight and our company is lightweight. And I think that is a structure that has served us very well. And so it allows us to be, I think, very nimble, allows us to generate a lot of cash, allows us to do interesting things on the M&A side and things like buybacks and while continuing to invest in the business.

And then I look at some of our peers in the space, some of the challenges they faced and we can see those things coming and investors, by the way, ask all those questions. So it's very important to us that we're telling a different story. That's why it's so important to have high margins out the gate, get to profitability quickly, show that we can grow the company without growing headcount because we've seen what happens when you don't kind of mind these things.

Got it. Also on that, just thinking about your margins and how your goal is to get to 100 million users, why not hire 30% growth so you can get there quicker? Is this just not how it works? How do you think about that?

Our new CTO, Amit, has the saying that's quickly become one of my favorites. Two engineers can do in 2 days, what 1 engineer can do in 1 day. And -- and so look, if there are opportunities where we can turn money into instant return, of course, we'll do that. But it's rarely that simple. Now in some areas, like are we hiring a bunch of ML engineers and did I say ML is probably going to be the #1 driver of growth? Yes. So to some extent, we're doing that. But a big investment for Reddit is like dozens of engineers. It's not hundreds or thousands. And I think the most important levers for productivity are, do you have the right strategy? Are you consistent? Are you executing well? Do you have the courage of your convictions to see these projects through even if maybe they don't work in the first launch or first iteration or second iteration, just kind of have a belief in the outcome.

I think those things for any company are what's most important is having the right ideas and consistency. I do think if we are successful in improving new user retention, which is really, I think, the output of having great product quality. That opens the door for increasing, for example, marketing spend and getting a better return there. So we keep an eye on this, right? We look at this machine, we want to be well positioned to like really step on the gas. But I think for Reddit, the core strategy is removing friction from the machine, and that's not like a manpower. That's not like man hours. That's doing like smart hours.

Got it. Okay. I'll ask one, and then we'll see if there's one from the audience. Your growth has definitely outpaced Street forecast since you went public on the revenue side. Where are you when you -- you were very undermonetized when you went public? Where are you in that journey to catching up to all the usage? And what are maybe some unlocks going forward?

The business team has been doing very well. I think we have -- the ads products are working well across the entire ecosystem. So large, medium and small customers, full funnel, all the way from consideration to transaction. I think one of the things that's been very powerful for us is that Reddit -- the conversations on Reddit are naturally commercial. 40% of what people talk about on Reddit are commercial. It just turns out what do human beings talk about? It's like what should I buy next? Now it's not always what should buy, but it's like what should I watch? What should I wear? What should I go? Like what's the best XYZ?

And so there's a natural, I think, alignment between the consumer products and then the ads business on top of it. Our ad technology has gotten consistently better. I think we have a lot of market tailwinds. Advertisers want Reddit to be successful, but they want to spend money elsewhere. They want to spend money with us. And so the conversations I have with customers has changed dramatically over the last 10 years. It used to be all brand safety. And then I think we did a really good job on safety and then it became what is community? They're like, hey, you're not social media, you're community, what is that? Now they totally get it, they're users of Reddit themselves. And so now it's just, hey, we need this measurement integration, like they'll come with their to-do list for us and more reach.

And so as I mentioned before, I think Reddit, the business can very consistently and reliably turn traffic into revenue. And so it all comes back to growing users in a healthy, reliable, sustainable way and the business, I think, will follow.

We'll see if there's a question out here. I got plenty more, but anyone here? There's one over here.

And I'm curious what you learned from the Google and [indiscernible] partnership and what's kind of the ideal [ ad ] partners look like...

Yes. So Yes. What we said during earnings is that the content on Reddit is like oil and that it's a foundational research that enables this modern technology. And truly, AI, as we know, does not exist without the content on Reddit. It's one of the largest sources of training data and it's the most -- so that's on one end of the stack, like create the models. And then Reddit is the most cited destination across all models. That's the other end of the stack. And so Reddit is used in pretraining, right, create the whole model. It's used in post-training, like teach the model how to speak like a normal person. It's used in grounding, like what do people actually think. And then on top of that, these models are running on a live search index of like what's going on, on Reddit.

So it's essential for the entire stack -- when we did the first round of these relationships, this was 2 years ago, the field was brand new. And so what we've learned over the last couple of years is both, I think, within our company, within our partners' companies, and I think just the Internet more broadly has seen how important Reddit is, right? You're not -- if you're using LLMs, you see Reddit all over the place. And so I think these relationships are essential for everybody involved, for all parts, right? The Internet consumer wins. I think the search platform wins, the AI model companies win and then we win as well, right? We get both traffic and mind share.

And so I think we have mutually a better understanding of where the value is, and it's our job to make sure we like fully capture that value. And so I will say these relationships have been complex or rather the deals are complex. They're almost like M&A deals. But the relationships, I think, have been mutually really valuable. And so everybody, I think, is incentivized to continue doing.

Got it. All right. We only have a couple of minutes left. I want to get these 2 in. Okay. We'll go to a little more rapid fire. But I know a lot of people care about the search product rollout. So where are you with that? And how are you thinking about possible revenues from search?

Yes. So search -- so there's 3 use cases of Reddit, feeds, community and search. Search is the newest. Search has grown 30% year-over-year on Reddit. Our product, formerly known as Reddit Answers, now just known as Reddit Search, is the LLM search product. That was a brand-new product last year with like 1 million users now. I think last quarter it was 15 million users. So that's growing nicely. Many new users run a search in their first session on Reddit. And so it's also -- search is an essential part of the onboarding journey. But Reddit search, I think, is the best at questions with no answers.

So you could try it right now, like what show should I watch tonight? I'd like this show, what show would you recommend? I need help with this video game. What's the best headphone? All these things. Now a couple of those examples or maybe all of those examples are also commercial searches. And so we started to integrate products into the search results. And so just -- and I think we'll be able to do more and more integrations like that, but really bringing our search results to life and kind of marrying, I think, the organic user need with the advertising products because, again, it's such a natural fit. It's what the users want anyway. So I see a lot of opportunity there.

So over the last year, we've done more product integrations. We announced a partnership with Shopify to do basically a one-click import of people's catalogs. And so those things start to show up in Reddit Ads and Reddit search. And so I think a lot of opportunity there as that search product continues to differentiate itself, continues to grow and provide more and more value for the searcher.

Got it. No ads right now, right, in search?

Ads are coming. Right now, it's like product links. I think -- the reason I stutter is because I don't think the user cares, right? They say, when I search for a headphone, I see a link for a headphone, they're happy. And then the monetization of that for us grows over time or starts to develop over time.

Got it. All right. I'm going to sneak one macro one before we wrap it up. The subject definitely has been subject to macro challenges. You mentioned that earlier to the user's question. But it seems like the market was not impacted much on results. Your Q1 was quite strong on the Middle East conflict. So why do you think spend has been so resilient so far this year? And maybe what differentiates Reddit if things do get a little worse going forward?

Yes, we have seen confidence in the market. I think what we've seen -- it's a good question. In the past, when the ads market seems to be sensitive with just what's going on globally. And so we'll see kind of shake up. So the whole industry will. But it's been remarkably consistent. I'd say what we're seeing is maybe a lack of visibility. And so people's horizons are maybe shorter than they've been, but the spend is still there. And I think people have been -- have macro concerns about the U.S. economy in general, but the consumers are still showing up. They're still buying. And so as long as that activity is still there, and we're not -- we hear a lot of questions about it, but we're not seeing any signs of weakness from our point of view. So it's not to say that there can't be more, but it's hard to imagine how could the world be more chaotic.

That's famous last words, I guess, right?

Great way to conclude. That's awesome. Thank you so much, Steve.

Really appreciate it.

Good afternoon. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to Reddit's First Quarter 2026 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Jesse Rose, Head of Investor Relations. Jesse, you may begin your conference.

Thanks, Krista. Hi, everyone. Welcome to Reddit's First Quarter 2026 Earnings Call. Joining me are Steve Huffman, Reddit's Co-Founder and CEO; Jen Wong, Reddit's COO; and Andrew Vollero, Reddit's CFO. I'd like to remind you that our remarks today will include forward-looking statements, and actual results may vary. Information concerning risks and other factors that could cause these results to vary is included in our SEC filings.

These forward-looking statements represent our outlook only as of the date of this call. And we undertake no obligation to update any forward-looking statements. During this call, we will discuss both GAAP and non-GAAP financials. Reconciliation of GAAP to non-GAAP financials can be found in our letter to shareholders. Our first quarter letter to shareholders and earnings press release are available on our Investor Relations website and Investor Relations sub-brand.

And now I'll turn the call over to Steve.

Thanks, Jesse. Hi, everyone, and thank you for joining us today. We're excited to start the year off with a strong first quarter. As we've been building Reddit over the years, I have often reflected on and been inspired by the unique opportunity in front of us and the fact that Reddit is truly a one-of-one company.

That idea came up again and again during Q1 with one of the most tangible proof points in our strong commercial results. This marks our seventh consecutive quarter with revenue growth over 60% and with industry-leading gross margins over 90% and adjusted EBITDA margin of 40% and record cash flow of more than $300 million. At the same time, our capital expenditures remained low as $1 million, underscoring the advantage of Reddit's capital-light model. When you look across the more than 300 publicly traded tech companies, there's only one that combines this type of growth, profitability and efficiency, and that's Reddit.

Our commercial success is differentiated because our community product is differentiated. But powers these results are red it's raw materials. First, we have deeply engaged users who come to Reddit it for high-intent uses, authentic recommendations and answers to questions like, what should I watch next and what type of stroller is best for 2 kids.

Second, we have an ad business that is built on contact, interest and commercial intent. Around 40% of conversations on Reddit are commercial in nature, where people are actively discussing products, services and purchase decisions. And these conversations are uniquely influential. 84% of shoppers say they feel more confident in their decisions after researching on Reddit. When you combine these two things, engage communities and commercial intent you create a powerful environment for advertisers. We see this in the outcomes we're delivering and in the continued scaling of our ads business and ARPU growth.

Another reason Reddit stands out today is our position in the AI landscape. Reddit is built on more than 2 decades of human conversation. Over 25 billion posts and comments and every month, our communities generate the equivalent of Wikipedia's entire content library in new content. As AI becomes more prevalent, people increasingly seek out real human perspectives and in turn, AI models rely on these perspectives to train and power their products.

Scarce assets tend to become more valuable over time and authentic human conversation at scale is becoming increasingly rare. Reddit's conversations are like oil for the modern Internet, a foundational resources powering the next generation of technology. On the user side, we are making steady progress, but we still have work to do to increase frequency and accelerate growth toward the levels we see on leading platforms.

We believe Reddit it has the potential to be one of a handful of scaled global platforms on the Internet. We already have tremendous reach today with nearly 500 million weekly users globally and 200 million in the United States. Now it's about driving both greater reach and greater frequency. In particular, we're focused on growing our daily user base in the U.S. to a size closer to that of the largest platforms. Our goal is to reach 100 million daily U.S. users and are actively executing a strategy to get us there.

One thing that has become clear is that product quality leads to growth. I believe our previous ways of working yielded the best results we were capable of, but not the results we aspire to. So to get to the next level, we first had to improve ourselves. Over the last year, we've made and continue to make a number of foundational changes to both our talent and infrastructure that we believe will unlock significantly greater headroom for Reddit's growth.

We strengthened our teams with more people who have successfully grown other major platforms, we've added critical machine learning talent to build the capabilities required for today's Internet, and we've improved our processes for data, experiments and shipping more quickly while still improving quality so we can realize our vision.

We made advancements across several product areas this quarter that we're encouraged by, including bot verification, improvements in core user engagement, performance gains across the stack and continued success with machine translation. Looking ahead to the remainder of 2026, our priorities include broadening the top of funnel, improving new user retention and making Reddit faster across the board, which remains a meaningful opportunity and can lead to an outsized impact.

Our mission to empower communities and make their knowledge accessible to everyone is ambitious, and it won't be achieved in a single quarter, but we're making steady progress, and we won't rest until we get there. As always, thank you for being on this journey with us.

With that, I'll hand it over to Jen.

Thank you, Steve. Hello, everyone. It was a strong quarter and an excellent start to the year for Reddit. There are a number of encouraging factors contributing to our commercial success and we're also seeing favorable secular trends that support Reddit's it's long-term opportunity. Beyond the raw materials Reddit has for an advertising platform, Reddit is playing a bigger role in the consumer decision journey. While people are using AI summarized information, people are also increasingly wanting to see and incorporate a breadth of perspectives from other people into their decision-making.

The value of authentic human perspective is increasing as more information is generated and summarized by models. That's where Reddit stands apart. People are looking for real opinions, real experiences and real product usage from other people. For example, people are coming to Reddit to validate what they read and hear elsewhere, including the responses they get from LLMs. This adds to our billions of conversations and perspectives that help people evaluate products, services and ideas through the lens of genuine human experience.

This search for human perspective is embedded in how people make decisions, especially purchase decisions. And as a result, Reddit is becoming more integral to that journey. At the same time, our advertising platform is becoming increasingly effective at converting that growing intent into meaningful business outcomes.

Now moving to our results. In Q1, total revenue grew 69% year-over-year to $663 million, and advertising revenue grew 74% year-over-year to $625 million as we saw broad-based strength across the business. Revenue growth in Q1 was driven by a combination of both impressions and pricing growth reflecting the scale of our platform and our investments in the ad stack to deliver strong outcomes and make every impression more valuable. Our investments in the ad stack, including machine learning for signal optimization and ad formats, combined with our go-to-market strategy are delivering meaningful outcomes for advertisers and driving strong growth in new advertisers.

In Q1, conversion-driven lower funnel revenue remained an area of strength growing triple digits year-over-year. Performance-oriented revenue represents over 60% of total ad revenue and is well balanced across industry verticals, creating durability and resilience while still leaving significant headroom for growth. In Q1, we saw strength across most of our top verticals, particularly retail CPG, tech and media and entertainment, while the number of active advertisers on the platform grew more than 75% year-over-year.

Now I'll discuss the progress in our ad stack and road map where our investments are measurable and our strategy is to make all businesses success and credit by delivering market competitive outcomes across objectives. We're executing this strategy across 3 areas: number one, scaling automation through our ads platform in RedditMax; number two, delivering advertiser value across all objectives; number three, expanding the Reddit for Business ecosystem.

Now starting with automation. Our strategy is to integrate more automation and AI into our ad stack to enable faster adoption of new features, make sure advertisers are set up to get the best performance from Reddit ads and increase the productivity and impact of our sales team. RedditMax launched to beta in early Q1, and we're seeing strong adoption and performance outcomes for converting mid- and lower funnel advertisers.

On average, advertisers are seeing a 17% reduction in cost per action and 25% more conversion outcomes when running Max campaigns. Advertisers are also increasingly adopting AI in their campaign setups with about 50% of Max campaign advertisers using AI-powered creative features to unlock even stronger performance. For example, modern furniture and rug company, cozy launched a Max campaign utilizing AI-driven targeting, automated bidding and creative rotation to scale customer acquisition with fewer manual inputs.

Max quickly became one of their most efficient levers for acquiring new customers, delivering 35% higher ROA and 28% lower CPA, while saving the team approximately 2 to 3 hours per week on setup and optimization.

Now moving to our progress across all marketing objectives. With our reach of nearly 0.5 billion weekly users, Reddit deliver strong outcomes for brand advertisers. In the upper funnel, brand auto bidding is now available to all advertisers, which dynamically adjust bids enabling advertisers to spend more efficiently and simplifying campaign management. Our tests show an average 16% pricing improvement when advertisers adopt auto bidding.

And in the lower funnel, our investments in machine learning signals and optimization are continuing to deliver performance and efficiency for advertisers. In Q1, we doubled the number of conversions delivered for advertisers across the platform versus last year, which means advertisers benefit from more conversions on their ad spend at lower cost per action, reflecting the efficiency and performance of our ads platform.

As I mentioned earlier, Reddit is deeply ingrained in the consumer shopping experience and we saw the momentum continue with 40% year-over-year growth in high intent shopping conversations last year. Our shopping products help businesses capture that intent more effectively. And with dynamic product ads or DPA, we're improving relevance in ad formats to drive stronger performance and advertiser value. Recent investments in DPA delivered more than 90% higher ROAS year-over-year on average and brands, including the health and wellness company, Liquid IV, so red its DPAs outperformed their conversion -- other conversion campaigns by 40%.

We're building on the progress with new shopping app formats designed to improve discovery and conversion including collection ads and ready unique overlays such as Reditor's Top Pick that capture the perspectives of Reddit's communities for specific products. And lastly, after our strategy to build an ecosystem of partners around Reddit. At Shoptalk in March, we announced an integration with Shopify that strengthens our retail and e-commerce partnership ecosystem. The integration expands our reach to advertisers and makes it easier for them to set up and scale lower funnel campaigns on Reddit.

The integration is early and in the process of ramping, we're excited about how this can build a deeper presence with mid-market and SMBs. As we scale performance advertising on Reddit, third-party measurement partners are important for validating our impact. In its latest retail commerce study, phospha found that Reddit improved cost per purchase by 34%, while increasing ROAS and helping advertisers scale spend by 2.5x year-over-year. We have seen growing adoption of Reddit Pro since expanding access to all publishers, giving them self-serve tools through auto import articles receive AI-powered community recommendations on where to share them and measure the reach and engagement of their content on Brexit.

Publishers ranging from global outlets to local press like Fortune Media to the SF Chronicle and Dallas Morning News and sports brands like Arsenal SC are now using RedditPro. Overall, there's a lot to be excited about this year. And every day, we see more businesses coming to Reddit it to connect with their audience and grow their business. And as the pace of change in the market grows, Reddit's fundamental assets and value proposition built on authenticity, trust and high intent keep us exceptionally well positioned. Thank you for joining us and for your continued support.

Now I'll turn the call over to Jure.

Thank you, Jen, and good afternoon, everyone. The financial headlines for Q1 was that Reddit's results stand alone in a very positive way. Reddit continues to scale quickly, generating cash flow and profitability results that few companies can match at this scale. Specifically, Reddit's Q1 47% free cash flow margin was a powerful proof point to superior cash flow generation. While Reddit's earnings power was evident in 2 financial milestone achievements.

On a GAAP basis, EPS reached triple digits in Q1 at $1.01 a share, up more than 7x from last year. And on a non-GAAP basis, Reda achieved a 40% adjusted EBITDA margin in Q1, up almost 1,100 basis points from last year, a similar signal of strength and differentiation. This strong starts encouraging, particularly since historically, seasonality has contributed to making Q1 our slowest quarter of the year.

I'll now provide more color on our Q1 results. Q1 revenues of $663 million grew 69% year-over-year, driven by a ramp in ad revenue, which grew 74% year-over-year to $625 million as we saw strong advertising demand across the funnel. It's our seventh consecutive quarter by growing more than 60%. Other revenue, which included revenue from our content licensing business reached $39 million, up 15% year-over-year. U.S. revenues were up 67%. International revenues were up 76%. Average revenue per user ARPU grew 44% year-over-year to $5.23.

Moving to expenses. Our Q1 total adjusted costs, which included both adjusted cost of revenue and adjusted OpEx were $397 million in Q1, up 43% year-over-year, but sequentially lower than Q4. Working our way down the income statement, gross margins were 91.5%, up 97 basis points year-over-year, our seventh consecutive quarter over 90%. Incremental revenues and hosting efficiencies helped to offset increases in cost of revenue, which was $56 million in the quarter, up 52% year-over-year.

Those cost of revenue increases reflect volume growth and users and ads served more ML usage and more international investments in speed and reliability. Operating expenses remain a bigger piece of our expense composition, which on an adjusted basis were $341 million in Q1 or about 51% of revenue, down from 61% of revenue last year as we gain operating leverage across the business. For Q1, adjusted operating expenses were about flat sequentially, but did grow 42% year-over-year, slightly elevated from last quarter.

These year-over-year increases continue to be driven by investments in 2 key areas: hiring and marketing. On hiring, we added about 32 net people in Q1, up 12% from last year and up about 1% sequentially from Q4. We're selectively hiring talent in key revenue and consumer functions like sales, ad tech and ML engineering. The returns from our investments in these areas are measurable and multiples of the cost within a short period of time.

Second, on marketing, our spend was primarily in the U.S., where we prioritize both paid and brand strategies to expand awareness and drive traffic. Total marketing costs in Q1 were in the mid-single digits as a percentage of revenue, but were lower nominally and as a percentage of revenue from Q4 as we benefited from lower seasonal ad pricing in Q1. Overall, user retention remains an opportunity and an important unlocker to improving investment returns and marketing.

Our third major cost is stock compensation and dilution, which remains a positive story. Stock-based compensation and related tax expense was $79 million or 12% of revenue in Q1 and down sequentially from Q4. Similarly, dilution remains modest. Total fully diluted shares outstanding was $206.4 million, up 0.1% sequentially and up 0.2% year-over-year. The modest share growth in the quarter reflects the continued tight management of our equity spend. For Q1, there was a slight tailwind for dilution for share repurchase activity, although share repurchase activity was modest in the quarter, about 35,000 shares and about $995 million remains on our $1 billion authorization from February.

A few more financial points of interest. The business remains capital-light. CapEx was $1 million, 0.2% of revenue. Net income was $204 million, $1.07 per basic share and $1.01 per diluted share, up more than 7x to $0.14 and $0.13 last year, respectively. We ended Q1 with $2.8 billion in cash and investments and we're well positioned to deploy capital across our 3 priorities, including investing in the core business, M&A and share repurchases.

Now turning to the outlook. We'll share our internal thoughts on revenue adjusted EBITDA for the second quarter. In the second quarter of 2026, we estimate revenue in the range of $715 million to $725 million, representing 43% to 45% year-over-year revenue growth with a midpoint of about 4. Our Q2 revenue guide considers the strong growth and momentum in the business as we exited Q1 and takes into account the lapping of a particularly strong growth period in Q2 2025 where total revenues grew 78% and ad revenue grew 84%.

Moving to adjusted EBITDA. We expect Q2 adjusted EBITDA to be in the range of $285 million to $295 million, representing approximately 71% to 77% year-over-year growth and an adjusted EBITDA margin of 40% at the midpoint. The Q2 guide assumes a total adjusted cost basis of $430 million, which implies a growth rate of approximately 29% year-over-year, which is lower than prior quarters as we begin to lap our investments in sales and marketing, which started in Q2 of 2025.

I'd also like to make a couple of other points. We anticipate our Q2 stock-based compensation-related tax expense to be sequentially higher than Q1, driven by increased hiring and the timing of our annual stock refresh grant which happens mid-second quarter. That said, for the quarter, we expect to see good cost leverage on SBC expenses with our internal estimates showing that year-over-year stock-based comp expenses could grow about half the rate of revenue for the quarter.

Also, as we mentioned on our Q4 call, 2026 will be the last period we disclosed logged in and logged out the AUQ metrics. Beginning in Q3 2026 our user disclosures will continue to include U.S. and international DAUq and WAUq as we've done historically. So to summarize, strong fundamentals matter and Reddit's financial model is scaling in a very positive way. Reddit is becoming a leader, a leader in growth, a leader in profitability and a leader in cash flow margin.

We're off to a strong financial start in 2026 and Reddit's raw materials position us well for growth and our advantaged financial model is turning top line gains into meaningful increases in cash and profitability. That concludes my comments. So let me turn the call back over to the operator.

[Operator Instructions] First question comes from Doug Anmuth with JPMorgan.

One for Steve and one for Jen. Steve, can you just talk about the work you have to do on the user side to increase frequency and accelerate growth and what you think will be most impactful over the next several quarters? And then, Jen, on DPAs, you announced a number of shopping tools to enhance DTAs. Can you just help us understand you're thinking about current adoption and the progress you're seeing with that format?

Sure. Thanks, Chuck. Okay. On the user side, we've seen some progress in the quarter that we're happy with improvements in onboarding. We had a couple of experiments do well, ramped up to 100%, some contribution from feeds as well. I think as we look over the rest of the year, the biggest drivers will probably be performance. So just the kind of pure speed of both iOS and Android, I still think there's a lot to do on onboarding.

And I think the biggest driver long term will be the feed. And so hence, the kind of focus on ML talent for us right now. So I think all of this is in alignment with what we've talked about for a long time, which is make the core product work better. I will say over there, we've seen nice progress on search as well, which is itself a driver. Search WAUqs are up 30% year-over-year. So I think solid progress there as well.

The big picture story here is we've been really focused on the team, the processes, the tech upgrading all of those things over the last year. So I feel the foundation is better than what we've seen in the past to achieve these outcomes.

I think the second one on DPA. Look, we launched DPA a year ago. And this is -- in the world of that, I'd say shopping is probably one of the more complicated products. And obviously, folks have been offering DPA for longer than we have. So there's a lot of headroom there to, I think, improve our models and the onboarding process, et cetera. But I think the team has done a really good job in giving, I think, great ROAs improvements to our customers.

With the Shopify and Wu commerce partnerships, I think that's an opportunity for us to acquire more sort of mid-market and SMB customers into DPA. So we're excited about that. Again, very early, but we're excited about that opportunity. And because right now, there's still thousands of advertisers that can adopt DPA that haven't adopted yet.

I will say, we're still early. We're very focused on retail and retail catalogs in the future that's still ahead of us. Folks use DPA for travel, for auto and for other categories that we haven't even focused on to date. So I think there's a long road map of opportunity here for us.

Your next question comes from the line of Josh Beck with Raymond James.

Yes. I wanted to maybe double-click on the ML talent, Steve. And maybe if you could kind of give us the short list of maybe some of the projects that the team is working on, what was most important this year? And then also with respect to top of funnel. Obviously, that's a goal for you all. I'm just kind of curious what have been maybe some of the most successful strategies and kind of how you're thinking about driving more top of funnel as you move through the year?

Sure. Thanks, Josh. So Josh, on machine translation -- excuse me, machine learning, so the feed, look, it's basically everything. So it's both collecting more signals. It's also being more judicious about the weighting of those signals. It is updating our models faster. So designing a new model, getting into production, I think that can be quite a lot faster. It's pretty much the entire stack.

This reminds me of kind of our journey in the -- on the ad side, where when we look ahead, we feel confident basically everything we do will work because it has worked for other platforms. And we're just on the early side of this journey. We've been bringing in a lot of talent from platforms that have billions of users who have worked on this problem before. So it's really the entire stack.

And quite honestly, it's all of our processes around it. our goal is to go from where we are today, about 50 million U.S. users to 100 million U.S. users. Since we have 200 million U.S. weeklies on the platform already, we believe investing in the feed here will improve retention and increase frequency and get us there. But really, my answer is everything.

Yes, I can talk about the top of funnel. So let me start with our existing type funnel, which is really significant, and that's some of the traffic that we get from search. And there's an effort to think about how do we convert that traffic from that search use case to the core Reddit use case, which is a combination of search, enjoying different communities and enjoying the feed. So that's an opportunity for us, and that's core to our road map strategy.

The second is increasing the top of funnel, which is the work that we do with marketing. And it's different by different territories. So if you think of a mature market like the U.S., that's an area where we go after specific audiences where we have a great content foundation in parenting or in football, like NFL. And we're just trying to help with people know that there's -- there's great content for parents and for football fans on Reddit.

And so we've done some of that brand and lead generation work to sort of prime the market to increase that awareness. Then we have work outside of the U.S. where we also have more brand foundational work. For example, people might know ready through search, but they may not have the broader understanding of the differentiators of Reddit that we're the most human place on the Internet that we have this network of communities. And so we're building, investing in some of the more broader brand foundations that, again, will allow us to prime a new type of funnel and add to the top of funnel that exists today.

So -- and both, I think we're very early in that journey and that for many years, Reddit, for most of his life has not invested in marketing. So that remains, I think, fertile ground for us.

Your next question comes from the line of Ron Josey with Citi.

Steve, I want to sort of understand a little bit more your points on the progress around verification processes and bought labeling here, particularly as a sign-up and log-in process evolves and the feed evolves as well. So help us understand a little bit more about the process around verification and the successor progress with bot labeling?

And then, Jen, with Reddit Max in the first quarter, clearly seeing a lot of progress and momentum here. Just talk to us about some of the key learnings that you're looking to take to this next level of Reddit Max and ex version as we continue to see greater adoption?

Thanks, Ron. So Yes. You asked about verification and bot labeling, and there's also a third dimension to this, which is user log-in in general. These things are actually all overlapping. So I'll start with the easiest one, bot verification. So we have what we call good bots on Reddit, which are basically programs that mostly moderators have written to help run communities on Reddit. We're porting those over to our developer platform.

And that will both result in them being labeled on Reddit more transparently and also allow us to batten down the hatches more on unauthorized spot usage. So this is both transparency for users and also part of the human verification and defense of Reddit. On the verification and login side, one of the key technologies there is something like Passkeys. So Paske is a general technology that includes things like Facetime, Touch ID, UV -- it's basically a log-in system that requires a person to do something, look at your phone or touch something.

This is both a more secure way of logging in, an easier way of locking in, which will help us just grow login users in general and then also serves as probably the lightest weight and most privacy and user acceptable way doing human verification as well. So all of these things kind of tie together to add more transparency to Reddit, improve bot defenses for Reddit and increase login for Reddit. All of this work is underway on all 3 of those dimensions. So we shipped a few things in Q1. We've got a few more coming in this quarter as well.

Okay. Regarding Reddit MAX, I've been really pleased with the adoption of Max. I think customers have been really willing to make the conversion. We've been focused on existing customers and converting existing customers. They're very pleased with the CPA benefits that they're seeing out of the gate, which is great. And I think what this opens the door for us to do is to have faster adoption of our new performance features.

And we see this because some of that benefit is coming from the fact that they hadn't adopted maybe 1 or 2 features that they auto adopted when they move to RedditMax and immediately, they are seeing the performance benefit of that. And so this will shorten the time line by which we can roll out performance features to customers what we're really excited about and sort of take the operational friction there out.

The other thing is they really love the insight. So we invested not only in delivering the performance, we invested in giving insights on, okay, well, what did the automation sign that was unique on Reddit that makes you learn about what you're creative -- how your creative match to what community on Reddit? And we're getting an incredible like positive response from our customers in that it doesn't feel black boxy to them. They're actually learning from using RedditMax, and that's an area that we'll continue to invest in.

And we really started with converting existing advertisers. But given the adoption and the positive response, we're now moving toward onboarding new customers directly into it. So feeling really, really positive about what we've seen so far.

Your next question comes from the line of Jason Holstein with Oppenheimer.

Maybe like one related question with 2 parts. So one, we get a lot of questions from investors just about BAU and how important it is. And obviously, from a long-term perspective, it's important. But right now, it's not a huge focus of the company given it's more about monetization. But I guess, Steve, maybe just talk about like, again, how important is it to you to see stable to improving BAU growth and the ways that you can kind of control that in the short term.

And then as we think about the discussions around AI and the third-party agents leveraging your data, how potentially you can get credit for, call it, DAU that's generated on third parties and perhaps that's a part of the larger discussions around a licensing.

Okay. So contrary to that, DAU is the primary focus of the company because revenue is doing very, very well. So DAU is both our mission communities for everybody and also fuel for the business. So DAU is the top priority. We have a particular focus right now on the U.S. DAU. So how do we go from 50 million dailies to 100 million daily. As I mentioned before, the opportunities on our doorstep because you look at our weekly number, there are 200 million Americans on radar every week.

So -- we think about how do we increase that frequency from maybe once a week to, for example, every day. There are -- there's a lot on the list here. Our focus the last couple of quarters has been onboarding. We're seeing progress there. We've moved new user retention in the quarter. Fees will be a major driver looking forward. I think we're at the relative beginning of our journey there. Search has been a consistent driver.

So carrying most of the weight the last couple of quarters has been machine translation were translated in the 30 languages today. We've been able to lower the cost there, which is nice. It allows us to scale even more there. And then performance is another big driver. And we look at gaps between iOS and Android and what we -- the expected delta should be, which is basically 0. So I think a lot of opportunity there as well.

So I'll just reiterate, DAU is actually the top focus of Reddit and in particular, U.S. DAU. You had a second part of your question about AI and some third-party agents. Look, this is an ecosystem we live in. We have important partnerships with both Google and OpenAI. Those are very meaningful to us. And I think it's mutual. We continue to value those. We continue to look for other top of funnel opportunities in the way to make our products mutually help each other, but nothing new to share on those specific relationships at this time.

Your next question comes from the line of Rich Greenfield with LightShed Partners.

I got a couple. First, I just want to circle back on this ambitious $100 million DAU goal. Is there a time frame for how you're thinking about achieving that? And if I look at weeklies versus dailies, weeklies are actually growing even faster than daily. So engagement on that metric is going down. I'm curious what's driving that? And how does that play into getting to this ambitious $100 million goal, Steve.

And then sort of a big picture question that ties to the quote you had in the letter. If you're the oil powering the modern Internet, $50 million to $60 million a year from Google and OpenAI seems like a pimple, I guess. How are the conversations changing heading into 2027 renewals given the state of where AI is today?

Thanks, Rich. Okay, $100 million. Look, when I came back to the company about 10 years ago, we were 12 million DAU. And over the last 10 years, we've 10x that to over 120 million DAU. Now we've got our sights set on 1 billion global DAU and $100 million in the U.S. specifically. I don't know the time line, but we are, I think, relentless in our work to get there. As I mentioned in my script, the strategy is the same, which is build the best version of Reddit.

And we've been focused on the last year. I thought we built the best version that our company was capable of, but that's not the best version that we needed. So we've done a lot of work on the team, on the processes, on the technology to get there. We'd like to get there as quickly as possible, but it's going to come through with very consistent product improvements. I've added a lot of the things on the list there, but it's all sensible things if you've used Reddit.

And look, I will note your comments on the pricing for AI deals and include you in our conversations with our partners. Look, the world can see that Reddits data is valuable, both our existing partners and potential ones. Look, at the end of the day, there is no artificial intelligence without actual intelligence, and that comes from Reddit. I think one of the dynamics we're seeing in the modern Internet is the more it becomes sanitized and summarized and optimized for attention by AI, the more that people crave the human, the human information that's both AI and also the Internet consumer or people in general that create it. And that's our business is those human connection and conversations.

Is there ever a value to an exclusive deal with one company versus opening up to everyone?

No comment on that, Rich.

Your next question comes from the line of Mark Melick with Bernstein.

Steve, I kind of hate to belabor this point a little bit. But kind of in your opening remarks about the foundational changes to talent and infrastructure. Is that really just focused on engagement and the product? And if so, kind of when did you realize that you were kind of hitting a ceiling? And so kind of how far are we into kind of some of these material changes. And I guess kind of following on Rich's point, when could we start to see a reflection in the KPIs of some of the efforts of these new changes?

And then secondly, Jen, you mentioned you've seen kind of strong performance in both price and ad impressions ad load. How do you kind of think about the tolerance of users for kind of increased ad load and kind of as you also think about balancing kind of the engagement question or ask it another way, is there any risk of kind of pushing the revenue lever too far that may have adverse effects on engagement?

Thanks, Mark. Look, we've been, I think, upgrading the company top to bottom, the people, the processes, the tech, We're in the middle of that now. I think we've made some important changes with new leadership on product and engineering. We're also bringing in a lot of experienced talent into the company as we speak. But I think there's more work to do there. There will probably always be more work to do there, but we are really in the middle of it. That said, we are working now.

And so we've made changes to onboarding to the feeds, to search that have all started to drive growth. We've seen some improvements in user retention, which is the number we care the most about. So I'd like to see our progress here accelerate. There's a lot, I think, below the surface just in terms of how quickly can we get code into production, how sophisticated our experiment readouts, how quick is our decision-making around these things.

But I look at all of these holistically as getting Reddit it to the next level. And I think we're partway there. I know we can get there. I think there's another couple of levels for us. And so we've been hard at it. But we do expect to see improvements in the results immediately, and we've seen some in this quarter.

I think the 1 on ad loads. So our outlook overall is still quite low compared to peers, especially if you look at it just on a feed-to-feed basis, it's still substantially lower and overall on Reddit, we actually don't even have ads in certain high growing surfaces like search, for example. So overall, I actually feel comfortable on an absolute basis of the ad experiences, there actually is not a high ad load.

But that aside, we test this all the time, and I think we're very thoughtful about it. As you increase the ad relevancy, which we do through our ML work and we increased the diversity of advertisers in our marketplace, which we're doing. We said we're growing active advertisers, 75% year-over-year. That actually helps with enabling, if you were to move the ad load lever like giving you the diversity to still maintain performance.

So just know that there are other levers that we focus on more than a lot, like -- our strategy is not to increase ad load. Our strategy is to grow users, all the things that Steve talked about, where we think we have a 10x opportunity there and to make the value of every impression more valuable through more competition and diversity through stronger optimization and hard marketing outcomes, more clicks, more conversions, more installs per impression so that the marketer -- we increased our inventory of outcomes versus our inventory of impressions.

Obviously, impressions will grow, especially with that underlying user growth, but we're very focused on the value that you get from the impression.

Your next question comes from the line of Tom Champion with Piper Sandler.

Just curious if you could talk about the monetization trends between U.S. logged in and logged out users. Just curious if those are converging at all? And then maybe for Jen, just any thoughts on the ad market? Anything looking wonky from the high oil prices or travel interruptions overseas? Just curious any general comments there.

Sure. So for login and logged out, which there spend a lot of time on it. I think the way we think about it is the value of an impression. And so the value of impressions is actually pretty consistent across our 2 main surfaces, the speed and our conversation page. And the only reason why logged-in users, you'd say have a higher ARPU than a logged out user is just because they spend more time and they see more impressions.

But the -- because of the time spent and the engagement, but the impressions are actually pretty equal in terms of their value. So there's no differential in our ability to monetize any impression against those users. There's no difference. And we do monetize both types of users, we have great contextual signal on all our users. And then obviously, for -- and obviously, we have history on logged-out users and even more in terms of logged -in users because they subscribe to communities, et cetera.

In terms of the ad market, look, it's -- we've seen this before. There's volatility in the backdrop, geopolitical I would say we haven't seen anything acute in any vertical. What we have heard from our partners is that some are planning on shorter cycles. They're planning month-to-month. They don't have as much visibility, no material change in their commitments and their outlook and what they're working on, but just that it might be shorter time line as they sort of assess the market.

And we're staying close to our customers, helping them through it with insights from Reddit. That's actually been very helpful in this moment. But overall, the market seems pretty stable, just maybe a little bit more month-to-month with lower visibility.

Your next question comes from the line of Mark Mahaney with Evercore.

Okay. I'll try 2 questions. I think when we focus on this DAU over weekly users were just trying to get a sense of engagement. I imagine there's a series of metrics that you track internally that track engagement. Can you just talk about those at least qualitatively, like maybe it's -- maybe it's maybe hours per session or minutes per session or something else, something that that touches on the quality of engagement. Could you just talk about whether there's some trends there that we can't really see from the disclosures that we have.

And then just on Max. And Jen, I know you talked about this earlier, but where are we in terms of the adoption of RedditMax? And how do you increase that adoption across your advertiser base?

Sure, Mark. Thank you. Okay. So on engagement metrics, there are a couple of key ones we look at. One is new user retention. So does the user come back after 7 days, after 30 days or after 90 days. That's our core measure of kind of product quality and stickiness. The second we look at is frequency. So how many days per week do users come to red it. We have a lot of users that if you were to do a histogram of days per week, the 2 tallest bars will be 1 day and 7 days. And I think this aligns with our intuition on Reddit. Once we've got you, we've really got you.

And then we have a lot of people bouncing off us from search or trying Reddit out. So converting more of those 1 days to 7 days, I think it's a big opportunity. We're starting to mature our thinking around sessions, so sessions per day. That's relatively, I think, a new way of looking at a new way of looking at it for us. But again, that will be a measure of the feed quality and general retention. So I think all of these things are important. The most consistent and I think most valuable long term will be new user retention. We don't report it, though you can peak at it through some third-party measurement, which I think will show kind of where we are in maybe relative to other folks.

And again, the strategy on all of these things is quality, it's performance, it's relevance, all of the basics. I think there's a lot of opportunity on each of these things.

Just on RedditMmax. So it's a top priority for our sales team in adoption this year. They started with converting advertisers. There's thousands of advertisers on Max already, but there's many more to convert still and we do want to move toward new advertisers onboarding directly into Max. We're working on putting Max in the API as well, so that partners who transact that way have access to MAX. So look, it's still early. I just was launched in January. So it's still early.

This is a multiyear journey in adoption that goes before us with PMAx and Advantage Plus have been at for many years. But I'm very pleased with the adoption rate and the interest and the benefits that people are getting -- customers are getting, so that's very, very encouraging, but we are less than half a year into this.

Your next question comes from John Colantoni, with Jefferies.

I wanted to ask about international users. Can you talk through how engagement has trended across markets that have undergone a machine translation and if you've seen any notable shift in logging and adoption or localized content creation once availability of the local language expands?

And second, following up on the logged in versus logged out users, is there any component of monetization for the log and related to personalization since you have more data on their usage trends and interest just sort of outside of the impressions themselves?

Sure. Thanks, Jon. So on international, what we've learned is every market is different. Machine translation is a is a great starting point for building the content base. But for the long term, what's most important is getting more native communities like communities created in country with content consumed locally in country. And so we've seen the effects of that be different in different markets. And what we've learned there is we need to have a focus on basically, what we call community success.

So how easy is it to create and grow a community on Reddit and this includes in the U.S. And so that's one of the dimensions to our product work is making it easier to create and grow sure. I think there's a lot of headroom here as well, and that will affect Reddit in all markets. On logged in and logged out, it's exactly as you would expect, as Jen was saying earlier, logged in users spend more time on Reddit and that's because, as you imply in your question, we know them better. And so we can -- we know their interests. We can do personalization and that, of course, just improves retention and time spent.

So seeing more users in the app, more users logging in, more users getting the personalization faster drives engagement and then, therefore, monetization. Again, all roads lead to basically the same strategy, which is help users find content that's relevant to them and come back to the app more often.

Your next question comes from the line of Justin Post with Bank of America.

A couple of questions. Just wondering if you can update us on how the generative AI engines are using your data and is that increasing since the deal started over 2 years ago? Any changes or evolution in the partnership on how they're using your data and the outputs we're providing?

And then second, I think Google made some algorithm changes in April. Maybe there's a question for Drew, but any impacts on usage retention or time spend or anything like that?

Okay. Look, Reddit has been for a while and continues to be the most cited source in AI citations across all platforms. We have also for quite some time then in the word Red it has been one of the most searched words on Google. It's been in the top 10, I think, for a couple of years now. So both AIs and Internet consumers love Reddit content. This is because that basically human verification of what AI is telling people is really important.

At the end of the day, you can get a surface level answer from AI, but you need the context. For many questions, there isn't an answer. There are multiple perspectives describing that answer and multiple reasons why different parts of that answer might be relevant to you or not. For example, take a simple question. What movie should I watch tonight? Well, it depends what you're into, how old you are all these things.

So Reddit it is the best at providing those answers and we've seen basically across the Internet, people increasingly crave the human perspective that Reddit provides. Google algorithm change these things are business as usual for us. There are always puts and takes. So we see these things. Sometimes they help, sometimes they hurt. They almost never stand out on our traffic long term. So we saw some changes in the quarter, but nothing further to comment on.

Your next question comes from the line of Benjamin Black with Deutsche Bank.

So Steve, you mentioned that authentic human connection and that content is your key differentiator. So can you maybe talk about the contribution rates on the platform. How those have been trending? What are you doing to support growth there?

And then secondly, maybe a slightly different take on a data licensing question. What criteria are you looking for sort of other than dollars to perhaps go from 2 partners to maybe 3 to 4 data licensing partners?

Sure. Thanks, Ben. So -- we've touched on the call, actually the 3 pillars of our product strategy. So we spent most of our time in these contexts talking about the onboarding and performance and retention, but we had a question about basically the community ecosystem and how important that is for both international and domestic growth. And then your question is on basically the content ecosystem.

So communities attract users, users create content. That's one flywheel. And the second is the users great content, content attracts users. That's another area of a lot of opportunity on Reddit. So things we look at there are post success rate. So what percent of posts successfully survived on Reddit, so they don't get removed by a moderator, that sort of thing. That's been a focus of ours.

So things like post guidance, which is an LLM that basically helps the user navigate the rules of Red it have been a big driver there. We're making improvements to post creation in this quarter. And so I think there's a lot of opportunity there as well. And then some maybe -- you need to Reddit, things like the age and Karma limits. So a lot of communities don't let new users submit, which makes it hard to grow new users. So working our way out of age and Karma limits with better AI-powered spam protection to help protect communities from bad new users like spammers, but be welcoming to good new users.

So there's a lot there as well. Maybe next quarter, we can spend more time on the community and on contribution because those are both important aspects of credit that we don't usually get into on these calls. And second, on data licensing, things other than dollars -- look, obviously, it's citations, it's mind share. It's just general partnership. Look, these companies have the data centers, the foundational models. And so our partnerships with all of these companies are multifaceted.

And so there's a lot we can do in terms of beyond just the dollars. It's how can these relationships help Reddit achieve its mission. So bringing in new users, advancing our own AI technology. So things like the machine translation, the LLM powered onboarding, all of the safety things, all of these things are kind of part of what we get through these relationships, which is why they're so meaningful to us beyond just the core debt relationship or the business relationship.

We have time for one more question, and that question comes from Naved Khan with B. Riley Securities.

Thank you very much. Two-part question. One on the rollout of answers plus search that you did in the U.S. Curious if it helped in increasing the session time or what are the benefits you may be seeing there or not maybe? That's one.

The second question I had is just on the international markets. And I think usually, you do not start to monetize markets until they reach a certain scale in terms of reach and usage. So of the markets that you are in currently, how many are you starting to monetize is, give us your thoughts there?

Sure. So on search, search, we've seen great performance. Search Dow, Search Wow, search queries, all up meaningfully year-over-year. Search is a great driver of retention. Search has also been a driver of DAU. The search team is, quite frankly, I think, doing a great job. If you use Reddit answers, you can see it better integrated into the product. It itself has more agentic behavior behind the scenes. So things like you can now ask it to compare 2 things, should I watch movie A or movie B.

And we're now integrating the product search catalog. So when you get answers from Reddit it about, let's say, what's the best headphone actually getting the links to the products as well. So search is one of the kind of main new use cases of Reddit. And across the board is a contributor to -- basically all of the things we care about in addition to search itself.

Regarding the international markets. So we have direct sales footprint across all channels in the U.S., Canada, U.K., covering Continental Europe as well as Australia through -- with a little bit of the APAC sweep from Singapore. That's where we have direct sales across actually both large customers and our scale channel, which includes SMB and mid-market. We then have channel partners that cover other areas, other regions where we're able to bring in active advertisers who might want cross-border export through a partner as those markets continue to grow audience.

So we're very thoughtful. We reevaluate this periodically in terms of our coverage model, but it's really based on how the users are growing in different areas and then we'll decide our coverage model.

Thank you. I would now like to turn the call back over to Steve Huffman, Founder and CEO, for closing comments.

Thanks all. Appreciate the questions.

This concludes Reddit's First Quarter 2026 Earnings Call. You may now disconnect.

Good afternoon. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to Reddit's Fourth Quarter 2025 Earnings Call. [Operator Instructions] Thank you.

I would now like to turn the conference over to Jesse Rose, Head of Investor Relations. Jesse, you may begin your conference.

Thanks, Christa. Hi, everyone. Welcome to Reddit's Fourth Quarter and Full Year 2025 Earnings Call. Joining me are Steve Huffman, Reddit's Co-Founder and CEO; Jen Wong, Reddit's COO; and Drew Vollero, Reddit's CFO.

I'd like to remind you that our remarks today will include forward-looking statements, and actual results may vary. Information concerning risks and other factors that could cause these results to vary is included in our SEC filings. These forward-looking statements represent our outlook only as of the date of this call, and we undertake no obligation to update any forward-looking statements.

During this call, we will discuss both GAAP and non-GAAP financials. Reconciliation of GAAP to non-GAAP financials can be found in our letter to shareholders. Our fourth quarter letter to shareholders and earnings press release are available on our Investor Relations website and Investor Relations subreddit.

And now I'll turn the call over to Steve.

Thanks, Jesse. Hi, everyone, and thanks for joining our Q4 earnings call. 2025 was a breakout year for Reddit. We surpassed both targets, built real momentum across our business, improved our unique community model at scale. We crossed $2.2 billion in revenue, up 69% year-over-year and delivered $530 million in net income. In Q4 alone, we welcomed over 121 million daily active users to our platform, up 19% year-over-year and over 471 million weekly active users, up 24%. None of this will be possible without our team. Thank you to our employees for a phenomenal year.

The momentum we're seeing across the business, especially in all 3 sections of our ad funnel is the result of years of foundational work coming to life. I know we are all eager to build on this success. The numbers fell just a small part of an important story. Reddit is at the center of a once-in-a-generation shift and it's not a coincidence.

We're now operating in a fundamentally different Internet, one shaped by opaque algorithms, generative content and growing distrust. And yet amid this shift, more people are turning to Reddit. Not just to aimlessly scroll, but to connect, learn and research. That's because Reddit is the most human place on the Internet. In a world flooded with AI swap, people are seeking real community, lived experience and trusted opinions. That's Reddit's differentiator.

To put it simply, more people than ever are coming to Reddit because Reddit is for everyone. One of the main reasons Reddit is the go-to place for community is the candor of our conversations. This authenticity is rare, and it's what makes conversations on Reddit uniquely helpful and influential. But in the age of AI, you can't easily distinguish a real person's thoughts or recommendation from a bot that trust erodes. That's why we're actively working on ways to preserve our authenticity and conversation quality. This begins the launch of verified profiles for brands and individuals in Q4 and will quickly move to bot verification and labeling next. We're making good progress here and are excited to share more updates in the coming weeks.

Our consumer product work remains a top priority, particularly driving user growth, retention and deeper engagement through more seamless experiences. Two areas of especially high priority improving new user onboarding and integrating our search interfaces. Let's dig into how these are going. On the onboarding side, we deployed numerous experiments in Q4. We're actively iterating on these learnings and working fast to improve retention for new and casual users. That retention supports growth, engagement, monetization and more effective marketing.

Next, search. In Q4, we made significant progress in unifying our core search with Reddit Answers, our AI-powered search feature. Together, they drove more search volume inquiries per user with over 80 million people searching directly on Reddit every week in Q4, up from 60 million just a year ago. We released Reddit answers in 5 new languages with more on the way and are piloting dynamic Agentic search results that include media beyond text. Reddit is already where people go to find things making our platform an end-to-end search destination is how we meet that demand.

As the industry evolves, how we think about our product and users must evolve too. We've historically reported logged in for slog out users, but as some of our work to streamline onboarding, instant personalization, for example, blurs the line between these states. The distinction between that makes less sense. As such, we plan to phase out reporting on logged in and logged out later this year.

In 2026, we're focused on making Reddit faster, more relevant and more accessible to everyone, everywhere. A big part of this effort is improving feed relevancy, using AI and machine learning to make Reddit feel more personalized and useful from the second you open the app. These are high-impact investments that help shape how new users experience Reddit and how often they return. I'm encouraged by the team's focus on velocity and I'm confident we'll feel the impact of the work this year.

To rise to this occasion, we're leveling up our execution, and that starts with leadership. I'm thrilled to welcome Maria and Gela Du Smith as our new Chief Product Officer. She brings a solid track record in scaling product organizations and is already helping us move faster and focus on the highest impact areas for users and growth. I have full confidence that Maria will be a great partner to the business and significantly up-level our pace and quality of results.

We're seeing strong commercial momentum right now and are confident in where we're headed. We have a special business model that is generating a lot of cash, which is why we're excited to announce a $1 billion share repurchase program today. It's a testament to our growth and our commitment to delivering for our shareholders as we continue to invest in the business. Our work ahead is ambitious, and that's by design. We have the right team, the right road map and the right moment. Now it's about execution.

As always, thank you to our employees, communities, partners and investors for being a part of this journey. With that, I'll pass it to Jen to share more about the business.

Thanks, Steve. Hello, everyone. It was a strong quarter and finish to the year for Reddit. Our unique community proposition and ad platform investments continue to drive differentiated growth and positive outcomes for our advertisers and partners. Total revenue in Q4 grew 70% year-over-year to $726 million. And for the full year, revenue grew 69% year-over-year to $2.2 billion. In Q4, the advertising business grew 75% year-over-year to $690 million, driven by broad-based strength across objectives, channels, verticals and regions.

Four revenue drivers fueled our growth: First, performance adds outperformed and revenue from lower funnel objectives such as purchase conversions and app installs doubled year-over-year, as we see the benefits of our investments in ML and new ad formats like shopping ads start to pay off.

Second, we saw strength across channels with year-over-year growth ranging from mid- to high double digits within both our large customer segment and scaled segment, which includes mid-market and SMBs, SMB revenue doubled year-over-year.

Third, we saw broad strength across verticals, 11 out of our top 15 verticals grew revenue by 50% or more year-over-year, led by retail, pharma, financial services and tech. And fourth, we saw strength across geographies. U.S. revenue grew 68% and international revenue grew 78% year-over-year.

Our ML and signals optimization efforts are making every impression work harder. In Q4, impression growth was the main driver of revenue growth, while pricing grew year-over-year as we delivered more outcomes and efficiency for advertisers. We also continue to expand our advertiser base. Total active advertiser count grew by over 75% year-over-year in Q4 as we added new accounts across all channels, including large mid-market and SMBs.

Now moving to our ad stack. Our strategy is focused on making all businesses successful on Reddit, by one, driving performance of our ad solutions across the funnel; two, improving usability for advertisers and productivity of our sales force through automation; and three, offering advertisers Reddit's unique solutions and ad formats. We made meaningful progress against each of these areas in Q4.

First, our investments in ML signals and models are driving efficiency for advertisers to bring more outcomes and lower cost per action. In Q4, click volume in the mid-funnel grew over 60% and lower funnel conversion volume doubled year-over-year. One example of our optimization improvements was our Q4 beta launch of campaign budget optimization for the mid-funnel traffic objective. EDO dynamically allocates budgets and reduces manual adjustments to maximize performance and lower cost per click for advertisers.

Our shopping solutions, Dynamic Product Ads, or DPA, emerge as a lower funnel driver in Q4, fueled by strong performance during the Black Friday and Cyber Monday period. While we are still early in our shopping ads journey, we are growing advertiser adoption and improving performance. Since last year, enhancements to our shopping ad ML models delivered over 75% improvement in advertiser road. To strengthen our lower funnel strategy, we continue to make it easier for businesses of all sizes to adopt our measurement tools, including Pixel and conversion API.

In Q4, CAPI-covered conversion revenue tripled year-over-year, like it is done each quarter in 2025. Second, improving usability for advertisers and productivity of our sales force through automation.

At CES, we announced the public beta launch of Reddit Max campaigns, our AI-powered campaign platform that uses ready community intelligence to optimize performance for middle and lower funnel objectives. In testing, MAX campaigns delivered an average 17% CPA reduction and a 27% conversion volume lift, validating it as a performance driver for our partners. We're encouraged by this progress and believe Reddit Max campaigns can be a powerful tool to unlock performance, make it easier to onboard new customers and deliver valuable business insights for advertisers from large brands to SMBs.

Third, offering advertisers Reddit unique solutions and ad formats. We continue to grow our suite of Reddit unique ad products and high engagement formats, including Freeform, AMA and conversation summary add-ons. In Q4, we launched interactive ads to beta through our partnership with Paramount to promote their movie running man and debuted reminder ads to beta, which is a tool for advertisers to drive performance and engagement around product launches and events, including live streams and AMAs.

To expand our Reddit Pro tools, we launched verified profiles that empower businesses and professional entities to build trusted identities and relationships with their audience on Reddit. For example, global brands ask Reddit communities for product reviews and feedback, and then they use that as a foundation for their marketing campaigns. Early results from verified profile tests show that verification helps drive content creation and community trust, verified users post over 10% more in their first week and generate more consumer engagement.

Now looking ahead, we believe we are well positioned for 2026, and our ad strategy this year will be focused on a few key themes. The first is scaling automation through our ads manager in Reddit Max. We plan to use Reddit Max as a foundation to streamline advertiser onboarding, particularly for smaller customers and enable them to leverage the AI power tools and automation to simplify campaign creation from setup to creative and augment performance from optimization to campaign insights. And through 2026, we plan to expand access and build automation that leverages its 24 billion post in comments, turning them into powerful signals to drive further improvements in ad performance.

The second theme is delivering more advertiser value across the full funnel. In the upper funnel, we'll drive more outcomes and efficiency with our investments in brand auto bidding and video view objectives. In the lower funnel, we have a lot of headroom to scale our ML models and drive more outcomes and performance. For shopping ads or DPA, we're improving relevancy in ad formats to improve advertiser roads and the adverse and the user experience. And for Ad pads, we're optimizing the ads to drive more in-app actions that can translate into higher lifetime value users. We're also expanding our measurement capabilities, including first-party measurement tools, third-party partnerships and enhanced attribution capabilities to show Reddit's impact.

And the third theme is expanding the Reddit for business ecosystem. Our strategy is to build partnerships around our read unique community insights and tools to expand our connections to global brands and businesses. Building on our API partnerships with Smartly and Blue Commerce, we are expanding our partner ecosystem to scale audience reach, creative automation and full funnel measurement. And finally, as more businesses leverage Redid as a signal for the ever-evolving consumer intent, AI-powered insights from ready Community Intelligence and accelerate how brands turn community conversation into actionable media strategies, facilitating faster product feedback and more strategic consumer -- customer relationships.

Overall, I'm incredibly proud of the progress this year as we turn our attention to 2026. We're excited about the opportunities ahead for Reddit. Thank you for joining us and for your continued support. Now I'll turn the call over Drew.

Thank you, Jen, and good afternoon, everyone. Q4 was a solid finish to a standout year for Reddit, both the strength and the consistency of our results continue to shine. These strong results included: first, total Q4 revenues grew 70% year-over-year. That's a particularly solid result given the tougher comp of 71% in Q4 of 2024.

Second, profitability hit a new high with net income reaching $252 million, 35% of revenue. and adjusted EBITDA at $327 million, 45% of revenue, making us a rule of 115 company this quarter, also high. Diluted EPS reached $1.24, up more than 3x 2024. And third, for the first time, free cash flow crossed $0.25 billion in a quarter, reaching $264 million in Q4. Free cash flow was 36% of revenue this quarter.

The consistency of the results is also worthy of review. First, Q4 was Reddit sixth consecutive quarter of over 60% revenue growth. Next, it was also Reddit sixth consecutive quarter of 90% gross margins. Third, stock-based compensation expense was below 20% of revenue for the third consecutive quarter, hitting 13% in Q4. It was nice to see negative dilution for the year with total shares outstanding falling slightly to $206.1 million, well below our medium-term dilution guide of 1% to 3%.

These strong and consistent results enabled our business to scale successfully in 2025. On a full year basis, 2025 revenues were $2.2 billion, up 69% and gross margins were 91.2%, up 70 basis points. Total adjusted costs grew 35% for the year, about half the rate of revenue growth. Full year net income was $530 million, 24% of revenue, and adjusted EBITDA was $845 million at 38% margin, right? It's incremental adjusted EBITDA margins for the year were 60%. Full year free cash flow was $684 million, more than triple 2024 diluted earnings per share reached $2.62, up from a loss last year.

I'll now provide more color on our Q4 results. Q4 revenues of $726 million grew 70% year-over-year, driven by a ramp in ad revenue, which grew 75% in Q4 to $690 as we saw broad-based strength across all 3 sections of the ad funnel. Other revenue, which includes revenue from our content licensing business, reached $36 million, up 8%. U.S. revenues were up 68%, International revenues were up 78%. Average revenue per user or ARPU grew 42% year-over-year to $5.98.

Moving to expenses. Our Q4 total adjusted costs, which included both our adjusted cost of revenue and adjusted OpEx were $399 million in Q4, up 46% year-over-year. The expense growth rate was slightly elevated from the prior 2 quarters, which had averaged about 38% and the full year where costs were up 35%. Now building on that thought, the main cost driver continues to be operating expenses, which on an adjusted basis were $340 million in Q4, about 85% of total adjusted expenses. Adjusted OpEx costs grew 41%, driven by investments in 2 areas: hiring and marketing.

On hiring or paid was similar to prior quarters. The company ended with 2,555 total headcount, up 14% versus last year and up about 3% sequentially from Q3, the same pace as the prior quarters. In Q4, we added slightly less than 70 net people with hires continuing to be focused on revenue-generating functions. Our ROI from sales and ad tech investments remain strong, multiples of the cost. G&A headcount was lower than last year and about the same as year-end 2023 as we continue to leverage back to pose resources. And secondly, on marketing, we invested more this quarter. The spend was in the mid-single digits as a percentage of Q4 revenues. We targeted our spend in 2 areas: user marketing and brand marketing to drive traffic and awareness.

On user marketing, spend levels were sequentially higher than in Q3, driven by increases in volume and price. Price increases were driven by both seasonality as media costs rose in Q4 versus Q3 and geography as most of the spends were targeted in the U.S. market. On the brand side, we launched new audience campaigns focused in areas like parenting entertainment and sports, which had some encouraging results, but there's more to do.

So rounding out Q4 with a few more numbers, it remains capital light. We continue to benefit from AI in many ways without the AI costs. CapEx was $3 million. We ended the year with a strong cash and liquidity position. Cash and cash equivalents on the balance sheet ended at nearly $2.5 billion, up $250 million sequentially and over $630 million from last year. So that covers Q4 and the full year results. Let me speak to a couple of additional items.

First, earlier today, we announced that our Board of Directors authorized a share repurchase program of up to $1 billion with no set expiration date. For many leading companies, strategic capital deployment has been an important driver of their total shareholder returns. And specifically, repurchasing shares could be an attractive incremental tool to drive TSR in the medium and long term.

For Reddit, we're proving our ability to grow durably at scale with our inflecting profitability, underscoring the attractive incremental margins inherent in our business. As we think about our 3 capital allocation priorities, we will continue to prioritize investing in our core business first. Next, we'll look to do M&A where it makes sense, both tuck-ins and more scaled opportunities, looking to buy capabilities, technologies and companies.

And third, when it makes sense, we'll repurchase shares. Our differentiated financial profile gives us the opportunity to invest in all 3 priorities. We plan to be in the market from time to time to buy shares opportunistically. We'll continue to be prudent about the financial management targeting to keep over $1 billion of cash on the balance sheet, consistent with our capital framework.

So switching gears to the second item. I'll now share an update on our user reporting. Big picture, we want to make sure the metrics we share align with how we're managing the business. As you heard from Steve, our product strategy is evolving. We're focusing on making it easier for all users to engage with content on the platform and find immediate value regardless of whether users are gain are logged out. Our goal is to grow all users. As a result, the distinction of whether a user is logged in or logged out has become less of a management focus and less important to how we think about and manage the business. As a result, we are updating our disclosures starting in the second half of 2026 to better reflect the metrics we use to run the business and evaluate our operating performance as we scale.

Specifically, starting with Q3 2026 disclosures, we'll continue to report the U.S. and international DAUq and WAUq numbers as we've done historically, but we will no longer report logged in and logged out metrics. Between now and Q3, we will continue to report logged in and logged out metrics for the first 2 quarters of 2026.

Turning now to the outlook. We'll share our internal thoughts on revenue and adjusted EBITDA for the first quarter of 2026, and as well as some additional thoughts on stock-based compensation. In the first quarter of 2026, we estimate revenue in the range of $595 million to $605 million, representing 52% to 54% year-over-year revenue growth with a midpoint of about 53%. Adjusted EBITDA in the range of $210 million to $220 million, representing approximately 82% to 91% year-over-year growth and an adjusted EBITDA margin of 36% at the midpoint. The Q1 guide implies a total adjusted cost base of $385 million, which would be down sequentially to Q4 expenses.

I'll also share our thought on the full year stock-based compensation expenses was $387 million or about 18% of revenue in 2025. Similarly, in 2026, we're aiming for stock-based compensation to be in the high teens as a percentage of revenue. Similar to our historic revenue trends, we expect nominal SBC expenses to increase each quarter. We'll target dilution at the lower end of our medium-term guide of 1% to 3%.

So overall, it was a strong finish to a solid 2025 for the company, and our attention now turns to 2026 as we continue to focus on converting our leading revenue growth and high margins in a meaningful cash flow and returns for our shareholders.

That concludes my comment. Let me turn the call back over to Steve.

Okay. Thanks, Drew. Not only here, we will take a couple of questions from the community. First, I want to acknowledge our Reddit stock community and their earnings called bingo card. I just want to confirm, I will refer to everything bad as an opportunity because that's what they are. And Drew will use the word Corpus in -- thank you all of you.

Okay. Question from the community. Why do a buyback instead of putting that money towards future growth and product initiatives instead?

Yes. I'll take that one, Steve. I think the short answer is we can do all of our 3 capital priorities. That's the idea. The strategy here is really to return capital to our shareholders, and that's the right strategic decision for the company. I think if you look at your great companies, you're leading creators of total shareholder returns, it's obviously the revenue growth and the margin expansion that drives the bulk of it. But the good companies that are the leaders in TSR for their careholders also have capital allocation strategies. And so this is a strategic move being made by the company to return capital to the shareholders. Our priorities haven't changed, Steve. We've got 3 priorities here. First and foremost, it's investing in the business; second, it's M&A; third is share repurchase where it makes sense. I think by the numbers, we now have $2.5 billion on the balance sheet in cash or very close to it. We want to keep working capital on the balance sheet as it were of about $1 billion in cash. And so you now have an ability to do all 3 priorities, which we haven't had before. Obviously, the business last quarter had a terrific quarter. Cash flow was $264 million.

What you're seeing is the model is starting to inflect and you're seeing the model really shine. CapEx for the full year for this company is under $10 million. So you're really seeing the model start to throw off cash. And so I think that just gives us the ability to execute on all three dimensions.

First priority investing in the business; second priority doing M&A would make sense; and then third, share repurchases will be opportunistically in the market from time to time when it makes sense.

Great. Thanks, Drew. Thanks, Steve, Jen. Christa, let's please open up the line for questions from the folks there.

[Operator Instructions] Your first question comes from Ron Josey with Citi.

Maybe one for Steve on product and one for Jen on Reddit Max. So Steve, given the amount of commentary and focus on the consumer product work, I want to understand a little bit more based on what you've seen around the revamped onboarding as well as incorporating answers in the web. Just talk about early benefits maybe on the onboarding flow change around retention. And then on search -- integrating search with enters any impact there, talk about the impact of user experience. So that's on product. And then, Jen, you mentioned Red at Max used to streamline onboarding. I'd love to see how you believe that, that might roll out throughout the year. And if that -- and how that channel mix might evolve across its advertisers between large, medium and SMBs.

Okay. Thanks, Ron. Consumer Products. So let's start with onboarding. We shipped a bunch of stuff in Q4. Some work, some did not, lots of learnings across the board. I'd say that the core thesis remains the same. Streamlining that process does improve retention. I think we've got some interesting things about using LLMs to help triangulate users' interest. I think one other learnings, also, I think it's pretty straightforward, bringing users into the feed faster requires the fee to be better. And so we'll be making pretty good investment into ML to improve that kind of cold start feed for new users. So I think lots of opportunity there and more to come.

And then on search, yes, we did bring the search bars together for the most part. So you're on the search part, you can go in to ask. And then if you run a traditional search, we'll often pop and answer there. To answer queries. I believe, were up from 1 million to 8 million -- 15, excuse me. Thank you, Jesse. 1 million to 15 million queries over the last year and then 60 million to 80 million overall search queries. So we're seeing nice growth there. And then as I mentioned in my remarks, we're going to continue to invest in answers. And I think where this is going is we'll just handle more and more queries with answers because it's more -- lets us respond in a more flexible way to the -- a wide range of things that users ask.

Okay. And then, Jesse, the question to you was...

Yes, Reddit Max. Yes. So -- thanks for the question. So right now, we're in the process of converting our lower-funnel advertisers into Reddit Max. Obviously, there are thousands of advertisers that need to be converted. That's an effort. So that's where we're focused for us for existing customers to have that experience are very familiar with Reddit. And then -- so I'd say it's still quarters out to really start to do the new onboarding, new advertisers on because we're so focused on conversion right now. But if I pull up, I think Reddit Max will make onboarding easier. I think it will drive productivity and performance gains for folks coming into the lower funnel for the first time and get that -- the benefits to creative and the optimization. So I think this is -- we think this will take out more friction and help us continue with our acquisition and growth.

Your next question comes from the line of Benjamin Black with Deutsche Bank.

Great. Steve, in the letter you spoke about Reddit being a source for humans, but I'd be curious to hear your thoughts on AI-generated content on the platform. How do you see that evolving from here? Could it ultimately prove additive and support engagement in therapy instances. Just interested to hear your thoughts there. And then secondly, in a world we're moving closer and closer to potentially going to an e-commerce. I'd love to feel and sort of -- I'd love to sort of hear how you think you're positioned, right? I mean I can imagine the value of data your content goes up dramatically. But how do you think about the impact to users, contribution rates and certainly the ad side of the business.

Benjamin, okay, so first question, AI-generated content. How do we think about it? Could it be additive. Well, look, depending on how you look at it, right, machine translation is AI-generated content. So there's certainly a role for using AI to communicate better, right? We do that. Our users do that. I think there's also a version of this where there's a -- we see more and more of this, I think, just on the Internet right people write with AI. And I think we're going through the transition right now, my opinion, it's kind of annoying. But there's still a human behind the prop. And then there's like a full like bot like behavior. The latter, we don't want on Reddit. And to the extent that there is automated uses of Reddit. We want those basically to be part of our developer program apps. And so we do see things like this on Reddit, like the Remind me bot and the high coupon bot and things like that. So I think -- the answer to questions like these, for Reddit is almost always in transparency and intentionality. At the end of the day, Reddit for humans to talk to other humans. And so to the extent that there's anything automated or generated, that needs to be very well labeled. But it doesn't mean we have to outlaw entirely. It just needs to be marked as what it is because there are times when it's helpful.

Okay, Jen, the question to you is agentic Commerce and how we think about that?

Sure. Look, I think Reddit is very well positioned for the changes the ever-evolving consumer decision journey, and very well positioned for what's coming in agenda commerce. Reddit is the point of trusted recommendations. It's where the human who actually have to deploy resources and make decisions is actually searching for what it is that they're interested in buying. I think the layer after that, which is when you do the price comparison and when you did the last click and the execution of that, could be commoditized, frankly, because that's where the agent will get the job done. But the human -- the last point of decision-making of what to buy and allocating resources is at the recommendation and Reddit has the best recommendations for products and services and that's present on Reddit and in our partnerships with LLM.

So I think we're really well positioned because marketers are always going to want to talk to the customer and the customer is going to be the one to deploy the resources and make those decisions. And that position is very, very important for all marketers, I think for any business.

Your next question comes from the line of Tom Champion with Piper Sandler.

Steve, can you talk about the monetization opportunity with logged-out users? Does removing the reporting distinction imply monetization can come closer to parity between logged in and logged out. And maybe you could just talk about the mechanisms to get there if so.

Thanks, Tom. I can take that. So look, logged in users and logged out users both see ads. And on an impression basis, the value of those impressions is There's actually no differential between them. The real differential is around engagement. So our strategy is to increase engagement, right? So what we want is the weekly users that we have to become daily users. And we don't want having to be logged in to be a criteria for personalization to get a better Reddit experience. And that's why this change to remove the log in and logged out metric because it will be blurred. It's about this creation of increasing the engagement. And as the -- when I say the logged out user gets a more personalized experience, and increases engagement, that's where you can get more value because every impact, you'll be able to see more impressions with that engagement. So the opportunity is in engagement via those product improvements that Steve talked about.

Your next question comes from the line of Justin Post with Bank of America.

Maybe a couple. Steve, just wondering if you could talk a little bit about the AI deals with Google and OpenAI. How are they using their data? And do you think it's really growing in importance for their models? And second, you kicked it off with some comments on bots. Do you expect any user impact? Or is there any revenue opportunities around verification?

Okay. So on -- thanks, Justin. So on the AI deals, really, our partnerships with Google and Open AI. I think we can see the growing importance of edit per Profound is the #1 cited source in AI answers. Our relationship with both companies are very healthy. The conversation is shifting from a purely business deal to more of a product partnership. And so I think the exchange will be -- we help you build the best version of your products and you help us build the best version of our products.

Specifically, what we're looking for in any relationship like this is can we bring users into the community parts of Reddit, right? Reddit product is human connection, it's conversation, it's communities. And we want to bring users into that experience on Reddit that, of course, generates more conversation and makes that whole kind of partnership flywheel work better. So that's where our head's at right now, but both relationships are great. On things like bots, no user impact. We remove and half for the lifetime of this company. Anything that we believe is a bot, we removed from our users before we share anything. But we do see more and more agentic usage of Reddit. Specifically, somebody might be writing a comment with ChatGPT and that sort of thing. There is a culture of labeled bots on Reddit already. So this is what I mentioned before, the remind me bot, the IQ bot, some things like that. And I think with the Reddit developer program, there's more opportunities to expand the functionality of Reddit. But that means that those sorts of interactions need to be well labeled. But the default assumption on Reddit it has been and should be that you're talking to humans because that's what Reddit is for is people talking to people.

The AI version of this challenge is just a new chapter in this challenge. We've seen this sort of challenge, right? It's just spam in general, really is what we're talking about. The SPAM challenge has been something we've been fighting for 2 decades on Reddit. So this is really an evolution of that challenge, which will continue to stay to...

Your next question comes from the line of John Colantuoni with Jefferies.

Great. Two, as you've seen more users engaging with Reddit answers and search, I'm curious how you've seen that impact monetization in the near and long term with your ad products within search still at nascent stages? And number two, Jen, you mentioned pricing has been a driver of revenue growth. I was wondering if you could put a finer figure on how much pricing contributed to revenue? And as you think about what drove pricing, I'd be curious to get your perspective if Tyson's contribution will remain low or start to grow over time and how you see that impacting advertiser adoption if your pricing starts to converge with other platforms?

Sure. Okay. So the first one was about answers in search. There's surfaces where we don't have monetization on, but obviously, is enormous market and opportunity for us. The behavior of searching both navigational and Agentic, right now seems incremental and additive to the existing engagement. And so that's great because that's an opportunity for us to have another touch point and a very specific touch point that often has a shopping, lower funnel, high-intent converting mindset to it. So -- it's something that we're really excited about, and I think that opportunity is ahead of us, but it's incremental to our opportunity today.

The next is a question about pricing. So we don't break out impressions in pricing numerically, but it was a growth driver. What's driving pricing is our strategy, right? So our strategy is to make every impression more valuable by delivering more hard marketing outcomes per impression to our advertisers, increasing the click-through rate and response rate. So we have more traffic to advertisers for research in consideration more conversions, more app installs, more app in-app events, right?

And so that's what's driving the competition and the pricing is the value of those outcomes. Now obviously, when you increase -- when pricing increases, it's a result of the demand for those outcomes. And what matters is the ROAS equation, it's the return on ad spend. So by getting a high LTV quality user is that customer incremental to what I had. So the measurement piece becomes very important in supporting those gains. And that's why measurement has been a big focus for us is constantly demonstrating the unique value of Reddit. You're getting incredible marketing outcomes with improving returns from all the ML and signals work, and that's actually what's driving our strategy in driving the success of the marketplace.

Your next question comes from the line of Rich Greenfield with LightShed Partners.

I got a couple. So first, on Reddit search, Steve, when I click on the small magnifying glass, I see the new experience where it kind of dynamically expands across the screen and they've got the ask button as an option. But search overall is still just like little magnifying glass in the upper right corner. I'm wondering, as you think about sort of the starting point or how you think about using the homepage real estate, specifically on the app to make it more -- especially as you've improved the search experience, and it seems like such a key part of -- in terms of the growth of usage. How do you make it more visually focused on by consumers from a homepage standpoint over the course of 2026?

And then just a follow-up on the commentary you had around Google and OpenAI in terms of like the renewal or the how you're talking about them in terms of more of a partnership going forward. The way that these companies sort of cite, not just you, but everybody on the Internet is they paraphrase the content, and then they put a little circle with a number and you can sort of click to get more information from where the sources are. How do you -- if you could wave a magic wander on your blackboard, like what do you want it to look like so that you have a way to drive people more deeply into the Reddit conversational content?

Okay, Rich, thanks. On the search bar, you are in one of the variants. There's another variant, the one that I happened to be in as a big fat first part of the So you can go on the natural journey or if you want to follow up after I can put you in the big search part vary. But anyway, we're testing lots of things there. I like the bigger one.

On Google and OpenAI, how we feel about the citations, look I think there's a lot of movement there. If I could wave a magic wand. I think what we really want is to say I go to some other platform, I say what's the best speaker. Reddit helps you get a few options for what the best speakers. I'd like to make that user aware, "Hey, you can go to the audio file community and talk to other speaker geeks. I think that's the sort of thing that really differentiates Reddit and would be additive to that user's experience. But there's so much movement in both of these products. The other part of my brand, I just have some empathy for product people who are moving really, really fast. So we're in close connection with them. Relationships are healthy. Obviously, there's a lot of movement there, and I expect that will continue to be. But we'll continue, I think, to evolve together through this. Thanks.

Your next question comes from the line of Vasily Karasov with Canon Ball Research.

I wanted to follow up on what you said earlier about the new advertising solutions across the funnel that you are launching. So it seems like brand and performance growth rates in '25 converged and yet in '24, performance was outgrowing brand by a lot, 2 to 3x, right? So given all the solutions you're launching, DPA, MAX and so on, should we expect performance to outgrow brand again given the brand has tougher comps too? Or are there any solutions on the brand side that should have said that.

Yes, thanks for asking. We are a full funnel solution. So that's -- Reddit delivers value for marketers from the top to the bottom of the funnel. And brand is absolutely a piece of that full funnel solution. We've actually been investing in brand as well. And when I think about 2026, it's an area we'll continue investing in. So the first is around rate unique experiences. So I mentioned the interactive ads that we started to test in Q4. I think there's a nice road map there for high-impact engagement, engaging ad units that are already unique.

The second is, last year, we invested in video, in deeper video views and video view optimization. And I think we're going to go deeper on that. For video forward advertisers, they can run campaigns on Reddit for maybe even longer video links is something we're interested in. And then just raw optimization and automation. We want to get auto bidding adopted broadly. We're going to work on things like auto targeting. And some of those optimizations that we have at the lower funnel, we want to do for the brand experience. And then finally, measurement is another area that's really important to us. We're going to be really focused on the MMM measurement partners and demonstrating brand value. So yes, there'll be a working brand. Again, we're a full funnel solution. We care about delivering value across every piece.

Your next question comes from the line of Mark Mahaney with Evercore.

Your next question comes from the line of Jason Helfstein with Oppenheimer.

Jen, just can you elaborate a bit more maybe help us understand around the progress as far as hiring, training, sales and support to catch up with basically what seems like more advertiser demand you can handle. So just, I guess, how long does it take to catch up? And just kind of where are you in that journey? And just any other color you want to share there.

Sure. Yes. I mean, look, we have a process by which we continually invest in our sales force, and we continually work on their productivity as well through tools and technology. And when we see an opportunity, I mean, the ROI is so high that we'll invest behind new verticals, new geographies, expanding channels. So something that we do, frankly, all the time, there is maybe behind the question is, like, could you grow faster if you added more resource or something like that? I think, again, all of this is -- there's a process by which you take these products to market and customer digestion and adoption. That's just the reality. And we have -- you can see we have so much going on in our road map across the funnel in terms of new products and services and adoption.

I think the team is doing a great job shouldering something like Cappy that doesn't drive revenue today while also servicing marketers' needs in the marketing platform. So we really are very thoughtful about that digestion. I think 6 quarters of 60% growth like we are fueling this business as much as we can, and we're always looking for opportunity to do it more. I don't know if you add anything to.

No, I think that's right. I think there's a really good partnership. And I think you're talking about -- are we chasing demand? I mean at times, but it's really about the enablers, like we've really got to work cross-functionally. But Jen and I are looking at it we're meeting multiple times a month on this very topic. And when we see an opportunity, I mean, it really behooves us to go and make investments, especially with the margin profile that we have here. It's really easy to make these investments. It's getting 3 to 6x our return out in 1 calendar year, like you can really -- and I love the fact that it's immediate returns and easy to track. You added this account or you can see the sales in this geography or vertical. So anyway, we're really pleased with it. It's really the enablers and sometimes the enablers in our control and sometimes we're waiting for customers on some of the neighbors.

Your next question comes from the line of Josh Beck with Raymond James.

I wanted to ask a little bit about the large advertiser category, kind of where you are with respect to wallet share and kind of how much headroom you think there is that some of these large advertisers? Obviously, you're having great momentum bringing on a bunch of advertisers kind of interested in that segment specifically. And then with respect to the outlook for Q1, I think going back to last quarter, you aired a little bit conservative because of some of the tariff dynamics. Is there anything to be mindful of just with respect to the broader environment relative to Q1?

Sure. I can take the first one on the large customers. So from a share perspective, I think that there's opportunity to go deeper with these partners when I look at it. Some often start with us in the U.S. territory but can become global partners, and some are just still mid-flight in that journey. I think the other is some of these large customers, they have like a portfolio of 100 different brands, and we still haven't penetrated all those brands. It's still in the minority percentage that we've covered at this point. So there's a lot more ground to cover in terms of the LOBs and the lines of business.

And then finally, I'll say we -- with the large customers, we typically started at the top of the funnel. In a lot of cases, and the opportunity is to move into the lower funnel. A lot of the lower funnel group is actually fueled by the scale segment, more and more by the large customer segment, but that's still an opportunity for us. And some of the reasons why it's just because laying down cap and some of that infrastructure for a lower funnel just takes a little longer with larger advertisers. We're making good progress, but there's still headroom there. So I mean, these advertisers are massive. And we're still, I think, scratching the surface in terms of our opportunity, given the footprint of Reddit that keeps growing 20% year-over-year when we settle.

Josh, on the guide, let me give you a couple of kind of pieces of information, let me specifically address your question like what's different is there anything different in the first quarter? Look, I think the guide that we gave for this quarter, up 52% to 54%, very similar to the last couple of quarters. We've been in the kind of the low to mid-50% range in Q3 and Q4. So very similar kind of profile on the guide. I think the double-click on the quarter itself is we were pretty strong from start to finish in Q4, like we had a good October. We had a good November, we had a good December. Like it was a good quarter for us. So we end with momentum in the business. I think on the margin, we're still -- on the forecasting side, we still entering quarter with work to do. We still have 40% to 50% of our orders to write in quarter. I think specifically to your question, in the first quarter, your business comes a little bit later. March tends to be your biggest month. And so you got to make March happening that for us in a lot of cases, can happen intra-quarter. That's really the only dynamic on the margin. But overall, very similar guide to the last couple of quarters, and there was momentum as we were leaving the fourth quarter kind of toward the holiday season. Does that make sense?

Your next question comes from the line of Naved Khan with B. Riley Securities.

I have a two-part question, if I may. So maybe just on the user marketing, I'm curious how you're looking at the on the user marketing spend? And what are your thoughts on scaling this further as we enter 2026? And then the other question I had is just on the M&A. Drew, you mentioned it includes even scale acquisition scale capabilities and I'm just thinking what these might be so in color would be helpful.

Sure. Let me take that. On the ROI side, I mean, pretty consistent with how others are modeling it. we're looking at the costs for particular advertising. And then we're looking at the users that we're bringing in and then we're looking at a retention curve. Pretty similar to, I think, how other companies look at it. I think the longevity of our model tends to be a little kinder than most because of the high gross margins that a user can bring here at Reddit. But overall, pretty linear model really valuing on sort of the income statement basis, what's the value that it creates and a pretty straightforward ROI payback in a relatively short period of time. So not a whole lot different than most of the other models that you may see in the business. I think we do have a little bit of an advantage because of the high gross margins. So the revenues that we are able to bring in with a user do give us a little bit better ability to pay back.

Okay. On the second one, on the M&A side, look, what I'm trying to say there is we continue to look at a lot of opportunities. I probably wouldn't overthink the scaled opportunities. I would just look at it as sort of a spectrum of opportunities. We're looking at capabilities. We're looking at companies, looking at technologies. I think we've been successful here tucking in a number of technologies. It's actually kind of relates to Jason's question a couple of minutes ago. It's really been one of the secrets of our success on the revenue side. The ad tech team has done an outstanding job. And how they've been able to really kind of drive our business. One of the ways is they tech-in technologies rather than build it themselves, saves us 6 months to market, saves us 12 months to market and you have a proven product. So we have been able to kind of tuck things in successfully, particularly on the ad tech side, that's really helped us in the monetization journey. I would say that's really been the primary focus of where we are today, but we're not ruling anything off the table. And that's why I mentioned the scale in the setup.

Your next question comes from the line of Andrew Boone with Citizens.

Jen, I wanted to ask about your shopping ads. What do you need to do from either a tool or an ad format perspective to grow that vertical faster? And then, Steve, going back to seekers and some of the generative AI tools that are now available. Can you flesh out what your view is or what the experiences that you're trying to build in terms of people coming to Reddit and looking for XYZ?

Sure, I can take the first one VPA. So I think that we have been -- our product today is competitive, certainly with like, say, Tier 2 peers pretty consistently, both on a prospecting and retargeting basis. But when you think about Tier 1 companies, I think we want to do more work on ML in terms of the signals that I think can improve our ROS to be even more competitive. I mean shopping is a pretty numerical return exercise. But we are quite competitive today with -- very quickly, we only lease it in April with a number of peers, and that's allowed us to grow shopping. The second piece is just a work on adoption. So with shopping, you have to get product feeds in you want cap because you want that real-time signal. So there's a little -- there's definitely more work in the setup for our sales team that we are -- the team is doing a really good job working through but they're just working through the customer list, you saw our strong growth in retail that's fueled by the success we've been seeing in DCA. Now it's very early. There's a lot more advertisers and a lot more opportunity there but it gives you a sense of like, I think, that of DPA's possibility.

Okay. And for search, we spent most of last year talking about how do we unify these two search experiences, the traditional search on Reddit and then the GenAI search. I think the main thing that we've learned is that the GenAI search results, I think will just be better for most queries. There's a type of query there, I think, particularly good. I would argue the best on the Internet, which is questions that have no answers, where the answer actually is multiple perspectives from lots of people, right? What should I watch? Where should I go? What's the best XYZ? I think Reddit is really great at this. When we thought about traditional search, it's more like navigation, take me to this topic to the sub-Reddit. But we're actually finding that the LLM search results is, in many cases, better for this as well. So that's the direction we're going. Search WAU in the last year is up 30% from 60 million to 80 million. The answer is WAU, so the LLM search went from 1 million in Q1, 7 million last quarter, 15 million this quarter. So we're seeing a lot of growth there. And I think there's a lot of potential. The other thing I mentioned in my script is where the LLM answer is mostly in Tecnol, we'll start making those responses more media rich as well. So one of the primary lease cases, I think there's 3 use cases that people come to Reddit for, one of the primary ones are searching, but the other is being for the fee or for the community experience. But search is a big one, and we see a ton of opportunity there.

We have time for one more question, and that question comes from the line of Colin Sebastian with Baird.

Appreciate the questions. We're hearing that Reddit is sort of evolving as a gateway for brands that want to surface more consistently in LLMs. And if you agree with that, does that create a pathway for more of those companies to also experiment with ads on the platform? And then secondly, maybe, Jen, do you see an opportunity to shift the perception that some advertisers still have of Reid as more of a niche content platform rather than an essential full-funnel opportunity? Is there marketing or outreach you can do to sort of help the market catch up.

Thanks, Colin. Jen is going to try to take the -- we'll tag team the first one together. So it's really interesting when -- when I talk to customers, so brands, increasingly, we've seen a steady increase over the years of first, what is Reddit, okay, what is community, okay, I get it, how do I show up well to now they're like, "I have to be on Reddit, and I have to show up in the right way. And I want a way to do this, not just as a paid customer, but organically, right? I want to provide great customer service. I want to get my content there because increasingly, they realize that the best way to do well in external search to show up in LLM is to show up well on Reddit. And so we're actually starting to see a shift in their thinking multiple brands told me we're reorganizing our social media team to be the Reddit team. So they're really starting to appreciate the differences with Reddit and the opportunity that it brings. And of course, I think if they can have great organic experiences, which we're trying to help them with, this is our Reddit Pro line of work. So the profiles, the official accounts, the labeled accounts, even some of that app and labeling that I was talking about before are all ways to allow brands to show up as first-class citizens, well labeled and intentional. And of course, this, we believe, will open the gateway for the customer relationship as well.

The only thing I'll add to that is I think I think marketers really -- they do -- they are -- they do understand that the reason why Reddit so valued for its recommendations and LLM because LLMs don't know anything unless it's from humans and has the best answers from recommendations. And I think their perspective is, yes, they would love that, but obviously, no 1 knows what comes out on an LMM does. But the opportunity on redid where all that human conversation is happening is the opportunity in front of them today to engage that audience and set a conversation with them through our marketing platform. And that is the best way to do it and to take advantage of marketing outcomes with that very influential audience today. So that is -- yes, it's a part of the conversations we have.

The second part is, I think you asked about Reddit appearing niche. This is one of those miss that we always had a misuse on Reddit because we show up as 100,000 communities that cover every topic on the planet. But when you put it all together, we're over 0.5 billion monthly and were $120 million daily. So it all adds up to a very large at-scale audience. it is constant education to remind people of that and -- because we can show up with those communities that can seem so niche.

I think the other piece we'll be doing is, as we build on our community insights and tools, we're going to be bringing that closer to our ads manager so that there's a nice connection between the insights the audience that you see and the volumes that you can actually touch on Reddit and engage with and then the opportunity in the marketing platform. So we want to bring that all together a little bit more so that volume and that scale is a little more present in the insights.

Great. Chris, I think we'll end the call there. I just want to thank everyone for joining and look forward to speaking again soon.

Thanks all. Bye-bye.

This concludes Reddit's Fourth Quarter 2025 Earnings Call. You may now disconnect.

Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to Reddit's Q3 2025 Earnings Call. [Operator Instructions]

I would now like to turn the call over to Jesse Rose, Head of Investor Relations. You may begin your conference.

Hi, everyone. Welcome to Reddit's Third Quarter 2025 Earnings Call. Joining me are Steve Huffman, Reddit's Co-Founder and CEO; Jen Wong, Reddit's COO; and Drew Vollero, Reddit's CFO.

I'd like to remind you that our remarks today will include forward-looking statements, and actual results may vary. Information concerning risks and other factors that could cause these results to vary is included in our SEC filings. These forward-looking statements represent our outlook only as of the date of this call, and we undertake no obligation to update any forward-looking statements.

During this call, we will discuss both GAAP and non-GAAP financials. Reconciliation of GAAP to non-GAAP financials can be found in our letter to shareholders. Our third quarter letter to shareholders and earnings press release are available on our Investor Relations website and Investor Relations subreeddit.

And now I'll turn the call over to Steve.

Thanks, Jesse. Hi, everyone. Thank you for joining our earnings call. Q3 was a strong quarter for Reddit with differentiated results and solid execution across product, growth and revenue. We ended the quarter with 116 million DAUQ and 444 million WAUQ, both growing around 20% year-over-year. We're especially encouraged by the mix of growth with organic product-led improvements and successful marketing both playing a role. This balance is working, and we're focused on replicating it across markets.

Revenue came in at $585 million, up 68% year-over-year, and our financial model is scaling very well. We continue to be GAAP profitable with a net income of $163 million and a net margin of 28%, an improvement of $133 million from last year. This quarter, we achieved a targeted adjusted EBITDA margin of 40%, which was a profitability goal we set at our IPO just last year.

Today, Reddit is the #3 most visited site in the U.S. for Semrush October 2025. That puts us in a rare company. YouTube is #2 and Amazon is #4 and reflects how Reddit is where people start, not just where they end up. People come here to find trusted perspectives to participate in communities that share their interests, no matter how niche or mainstream and increasingly to engage directly with brands, institutions and publishers.

In September, we launched new Reddit Pro tools tailored for publishers. Early adopters like the associated press can now sync their feeds, automatically import articles, track how their stories are shared and use AI-powered tools to find the right communities. Our consumer product strategy continues to focus on making Reddit easier to use and more rewarding from day 1, so casual users become daily users. They're already coming to Reddit. Now it's on us to make the experience worth coming back for by being more relevant and intuitive.

To that end, we're making real progress across the 3 main focus areas we shared last quarter: core product, search and internationalization. Let's start with the core product. We're redesigning the Reddit experience with a more modern search forward interface and streamlining onboarding, so it's easier for new users to find what they're looking for with a dynamic personalized home feed. We're also helping more people contribute to their favorite communities by using AI to interpret subreddit rules and surface post insights.

On the moderation side, we're investing in tools that help mods grow and strengthen their communities. These tools are now live in over 3,000 communities, which are seeing 30% more active moderators on average. Moderators aren't just enforcing rules. They're shaping culture, building communities and helping Reddit thrive. Our job is to give them the tools to do it more efficiently.

Next, search. Search is one of our biggest opportunities because Reddit conversations are uniquely authentic, contextual and helpful. This is why we're investing in making Reddit a true search destination. In Q3, over 75 million people searched on Reddit weekly, and that number continues to rise. Reddit Answers provides users with curated community-powered insights that are often more helpful than traditional web results. We started integrating Reddit Answers into core search, increasing its visibility across conversations and rolling out to non-English languages.

Our aim is to have a single great search experience on Reddit. And third, internationalization. Our international growth continues to accelerate. Machine translation is available in 30 languages, and it's a major driver of top-of-funnel growth outside the U.S. We've built a local content framework to identify top interests in each country, which we use to guide partnerships, content and marketing. This approach worked well in India, and now we're applying it in Australia, Brazil, Germany and France. We're focused on finishing the year strong and putting our strategy for 2026 in motion.

Looking ahead, our biggest priorities are growing app users by improving the experience and therefore, retention, broadening the types of users and communities that call Reddit Home, both in the U.S. and globally, increasing top-of-funnel growth by diversifying the sources of traffic, including organic, paid and publisher-driven and of course, scaling monetization and ad formats for our users and partners.

Reddit is in a unique position. We're not trying to be the next anything. We're focused on being the best version of ourselves and what the Internet needs most, a place where people can connect on almost any topic and find genuinely useful information because no matter what you're going through, someone on Reddit has already been there, done that and shared the story. Thank you for being a part of this journey. I'll now hand it over to Jen to walk through the business in more detail.

Thanks, Steve. Good afternoon, everyone. I'd like to start by building on what Steve mentioned about our consumer product strategy. We're excited about the opportunity to meaningfully grow our user base, both in the U.S. and internationally. And as we refine our strategies, our consumer product road map is focusing more intently on the Reddit app. This is where we can build direct high engagement relationships, which are most valuable to both our users and our business.

The app can be more personalized, have easier onboarding and incorporate search more consistently. These kinds of changes can impact user retention, increase returns on marketing and help us better convert web users into the app. We're also working on expanding our users, communities and contribution across Reddit. We recently introduced tools focused specifically on publishers to help them share content and engage organically on Reddit through Reddit Pro.

Now moving to monetization. In the third quarter, we demonstrated continued growth and strong execution with total revenue reaching $585 million, up 68% year-over-year. Our unique proposition and ad platform improvements delivered differentiated growth and positive outcomes for advertisers. The advertising business grew 74% year-over-year in Q3, reaching $549 million, and the growth was driven by broad-based strength across the business as we continue to expand existing relationships, acquire new customers and diversify our advertiser base.

The total active advertiser count expanded by over 75% year-over-year in Q3 as we added new accounts across all channels, including large mid-market and SMB businesses. Now moving to our ad stack. Our strategy is focused on making all businesses successful on Reddit by driving performance of our ad solutions, improving usability for users and productivity for our sales force and offering our advertisers and partners Reddit unique solutions and ad formats. We made meaningful progress against each of these areas in Q3. First, ongoing investments in our ad models and formats are driving greater performance and efficiency, which means better returns for advertisers.

In Q3, we continued to optimize our models for lower funnel objectives, including app installs and conversions. Model improvements to our lower funnel app ads objective generated double-digit percentage improvements to performance outcomes and ML-driven optimizations in the lower funnel conversion objective improved performance by over 20%. We continue to enhance our shopping solution, Dynamic Product Ads, or DPA, which launched to general availability earlier this year. We're excited by the capability and seeing ongoing improvements to performance beyond the core conversion objective. DPAs currently account for a small portion of our total lower funnel revenue. Broader advertiser adoption remains an opportunity and as it takes a little more time and resources for clients to implement this more complex ad product.

To strengthen our lower funnel strategy, we continue to make it easier for businesses of all sizes to adopt our measurement tools, including Pixel and conversion API or CAPI. In Q3, CAPI covered conversion revenue tripled year-over-year. Second, improving usability for advertisers and productivity for our sales force. We're investing in automation across our full ad stack to help drive adoption of our ad tools and improve performance for advertisers. For the upper funnel, we launched the beta of auto bidding, which simplifies budget management and improves efficiency, leading to over 15% more impressions and lower pricing for advertisers.

In the middle and lower funnel, auto targeting is delivering strong results and adoption is growing over 50% year-over-year. We're also in early testing of our end-to-end automated campaign platform that uses AI to streamline campaign setup. It is focused on activating mid- and lower funnel objectives and provides customers with insights on what made their campaign successful. Early results are promising with advertisers unlocking higher return on ad spend while spending less time managing campaigns. We're continuing to test the solution with a number of global advertisers across business sizes and verticals and adding new features.

Third, building Reddit unique solutions and ad formats for our advertisers. In the third quarter, we expanded access to conversation summary add-ons, a distinctive ad format that lets brands integrate positive Reddit conversations into ads. We're now testing this format with a broader set of advertisers across the funnel and seeing encouraging results with brands like Befesa, the mid-market video game publisher, seeing 15% higher click-through rates. We're developing interactive ads built on our developer platform, allowing advertisers to create custom experiences like mini games or quizzes directly within an ad. This format is testing now and the plan with plans to scale more broadly next year.

Finally, we're seeing momentum with our free-form ad format launched last year, which lets brands tell richer stories through multiple media types in a post that feels native to Reddit. For example, FootJoy used freeform ads to promote their new HyperFlex line of golf shoes, delivering click-through rates 100% above benchmark and time spent more than 50% above benchmark. Overall, Q3 was another strong quarter for Reddit. I'm proud of the progress and the improvements we're delivering for our communities and partners and excited about the opportunities ahead.

Now I'll turn the call over to Drew.

Thank you, Jen, and good afternoon, everyone. Our solid Q3 results again demonstrated the financial model continues to scale well. And specifically, Reddit can be a leader in both growth and profitability. Total revenues grew 68% year-over-year, and our adjusted EBITDA margin reached 40%, passing that important profitability benchmark for the first time. The key to our financial success is continued traction across our 5 financial strategies. These strategies include: first, achieving differentiated revenue growth. Revenues grew more than 60% for the fifth consecutive quarter. Second, expanding margins. Gross margins expanded 90 basis points year-over-year to 91%, our fifth consecutive quarter of over 90%. Our adjusted EBITDA and net income margins expanded by 1,300 and 1,900 basis points year-over-year, respectively.

Third, scaling profitably. GAAP net income reached $163 million and adjusted EBITDA hit $236 million, both new highs for Reddit. Our net income margin was 28%. Our incremental adjusted EBITDA margin hit 60%. Fourth, generating positive cash flow. Q3 cash flow ended at $183 million, and our free cash flow margin for the quarter was 31%. In the last 12 months, we've generated over $0.5 billion of free cash flow. Cash and cash equivalents on the balance sheet continue to build at $2.2 billion.

And fifth, minimizing dilution. We continue to view stock-based compensation and dilution as business costs and manage them closely. The progress continues to be evident Total fully diluted shares outstanding were 206.1 million, down from both 206.6 million last quarter and 206.2 million last year. Similarly, stock-based compensation costs fell sequentially, both in dollars and a percent of revenue basis from 19% to 16%. I'll provide a bit more color on these headlines. First, Q3 total revenue of $585 million was driven by our advertising revenue, which grew 74% year-over-year to $549 million as we saw strength across objectives, verticals, geographies and channels.

Other revenue, which includes revenue from our data licensing business, reached $36 million, up 7% year-over-year. Average revenue per user ARPU grew 41% year-over-year to $5.04, which is still low on an absolute basis and remains an opportunity. Regionally, revenue grew 67% and 74% year-over-year in the U.S. and internationally, respectively. In the quarter, 4 revenue drivers fueled growth. First, performance ads and brand ads had strong quarters, both growing more than 70% year-over-year. Second, impression growth remains our key driver, but we saw a tailwind from pricing in the quarter, a consistent trend so far this year as we continue to deliver value and favorable outcomes for advertisers.

Third, we saw strength across the funnel with growth ranging from mid- to high double digits in the upper, middle and lower funnel segments. And fourth, we continue to see diversified strength by verticals. We had 9 of our top 15 verticals grow revenues by 50% or more. Now moving to expenses. The growth rate in Q3 total adjusted cost was very similar to Q2. Total adjusted costs, which include both cost of revenue and OpEx, were $349 million in Q3, up 37% year-over-year, consistent with a 38% growth last quarter. Our main cost driver continues to be operating expenses, which on an adjusted basis were $297 million in Q3, about 85% of total adjusted expenses.

Adjusted OpEx costs grew 35% in Q3, the same growth rate as Q2, close to half the growth rate of our revenue, which was 68%. Most of the increase in OpEx costs were driven by our growth investments in sales and marketing. Adjusted sales and marketing expenses were $115 million in Q3, about 20% of revenue, in line with peers. Sales and marketing investments were made in 2 key areas: first, building out our sales team; and second, brand and user marketing. Let me expand on each.

First, our sales team investments are primarily adding people resources in customer-facing areas like sales, marketing and ad tech. In the quarter, the company grew total headcount about 3% sequentially, slightly more than 80 net adds with about 70% of the net hires focused in these 3 growth functions. Our investment track record continues to be very strong here with fast paybacks and investment returns multiples higher than the cost.

Second, during the quarter, we continued to invest strategically in brand campaigns and user marketing to drive awareness, acquisition and engagement. Our marketing spend was aligned with creative campaigns and targeted specific growth segments. We maintained a balanced approach to investing in brand awareness and performance marketing in both the U.S. and international markets. We remain thoughtful with our Q3 spending, targeting marketing expenses in the low to mid-single digits as a percentage of revenue. We're poised to scale marketing spend where we see the traction is promising. We'll continue to invest in those areas if we see the returns are sustainable.

Let me finish up the results discussion by adding a couple of other call-outs for the quarter. In Q3, our CapEx remained modest $2 million, less than 0.5% of revenue, which means both operating and free cash flow continue to move in lockstep. Net income was $163 million or $0.87 per basic share, $0.80 per diluted share, up 4 to 5x from $0.18 and $0.16 last year, respectively. So as we look ahead, we'll share our internal thoughts on revenue and adjusted EBITDA for the fourth quarter, which is where we have the greatest visibility.

In the fourth quarter 2025, we estimate revenue in the range of $655 million to $665 million, representing 53% to 55% year-over-year revenue growth with a midpoint of about 54. Adjusted EBITDA in the range of $275 million to $285 million, representing approximately 78% to 85% year-over-year growth and an adjusted EBITDA margin of 42% at the midpoint. So overall, we accomplished a lot in Q3 and the output metrics of users, revenues and margins reflect that progress. The business model remains quite powerful as we saw impressive revenue growth be converted into 90% gross margins, 60% incremental margins and now 40% adjusted EBITDA margins for the first time. That was a pre-IPO goal for Reddit and an important milepost to pass. That concludes my comments for Q3, and now we turn our attention to the seasonally important fourth quarter. Let me turn the call back over to Steve.

Thanks, Drew. We'll start, as usual, with a few questions from the RDDT community, and then we'll turn it over to the rest of the call. Question one, I am impressed by the growth in international DAUQ, 31% year-over-year. Can you give any detail on which countries in particular stood out for growth?

Thanks for the question. We're seeing strength across a number of regions and our focus countries, in particular, France, Brazil and India. And these are some of the first countries where we launched our international playbook, which includes machine translation, which is a good driver of top-of-funnel growth, local content framework based -- a local content framework, which is based on interests and passions, marketing efforts to drive awareness and then finally, local partnerships with brands and notable people.

Question two, a question about what we are doing to improve the user experience, making it easier to contribute and helping new users understand subreddit rules.

So improving the onboarding experience and delivering value early in the user's journey is a top priority for us. We want them to see in their first session that Reddit is amazing and has content for them. So our goal is to connect users with relevant content very quickly.

Community rules are a unique Reddit feature. So every subreddit has rules that is written by its own community and enforced by their own community. But what we're doing is we're using AI to make it easier for those user written rules or moderator written rules to be enforced automatically to make moderation more fun and efficient. And so that's coming along. That's out there and working nicely in many cases. And we're supporting the contribution journey, so users posting successfully using AI-powered tools like post guidance and community recommendations. -- to, for example, tell a user before they submit a post, whether or not it violates the community rules, which has historically been a friction point for new users.

Okay. Now I'll turn it over to the rest of the call for questions.

[Operator Instructions] Our first question comes from Ron Josey from Citi.

Steve, I wanted to ask about users and then also on product. And so can you talk to us a little bit more or talk to us a little bit more just about user growth trends here, particularly as we go into 4Q and going forward in the context, I think you said on the call, we're increasing top of funnel growth by diversifying traffic. So any insights on, call it, immediate term or near-term trends on traffic and more details on diversifying traffic progress? And then on Answers, now that we're embedded in search results reaching 75 million WAUs, would love to hear engagement trends from those users? Are they more -- are those users who are using Answers more engaged, asking more questions, things along those lines?

Thanks, Ron. Okay. Question one, user growth trends. So as we mentioned in Q3, it's a nice balance between organic and paid. External search was basically flat. Of course, that can ebb and flow. The product initiatives, including machine translation were the largest contributors. And our product road map, we're still working very hard through that. Marketing today is very broad, but we want to focus on growing our most valuable users in the app and improving ROI there.

Looking into Q4, we exited Q3 higher than our average. So we have a head start. Beyond that, we're going to see how the quarter plays out. And thinking bigger and longer term, we're really focused on the product to drive sustainable growth. We have 190 million Americans visit Reddit every week. So the reach is there. Our aim is to increase the frequency of those visits. And that really means focusing on that first session user experience to improve retention, which compounds into growth.

As for Answers, that integration is coming along nicely. Our goal there is to build a global unified and modern search experience. The community vote signals that we see on Reddit, the authenticity and trust are all differentiators in Reddit Search. We're currently handling about 20% of our search volume in Answers or in that kind of core search box, and that full integration is coming in the coming quarters. We've also expanded Reddit Answers to non-English languages very recently last week, Spanish, German, Italian, French and Portuguese. So I think lots of opportunity there. And then very high level, Search is something that many users do in their first session. And so this is a part of kind of the general onboarding and retention strategy, which is make sure that when new users run a search on Reddit, it's great results and it's differentiated, that should turn into improved retention for us, which is why it's such a priority.

Our next question comes from Tom Champion from Piper Sandler.

Jen, I was wondering if you could talk about Publisher Pro. Is there a revenue opportunity here? Or is this about bringing new content into the Corpus and maybe driving user engagement on Reddit. And Drew, maybe for you, curious if you could talk about user marketing, how you're approaching it domestically and in rest of world. And just curious if you intend to ramp user marketing spend going forward.

Thanks, Tom. I'll take the first one. So I think we think about Reddit Pro, first and foremost, is bringing, I think, value to the platform. So Reddit is better when we have a diverse set of users and entities and leagues and businesses and publishers add a lot of vibrancy to our community because they bring content and a lot of our communities are talking about these organizations. And so having them engage on our platform, we think, is a really -- and ReditPro is really positive and Reddit Pro is a way of finding -- giving them a home on Reddit from which to do that.

And of course, obviously, if we have more engagement on the platform, that converts into revenue. Having Reddit Pro also allows businesses to find a home on Reddit. They can have their own profile. They have tools that allow them to find insights who's talking about their brands, et cetera, or their products. And so that is really helpful because that's -- those are potentially leads into our advertising platform. Publisher tools specifically, I think our vision there is to help those publishers be able to bring their content on to Reddit. That could be in multiple formats and text and video, et cetera. And I think we'll just increase the contribution, the content on Reddit and the vibrancy of the platform. So I think it's accretive in a lot of ways.

So on your second question on how we're thinking about the financials of it and where we're focused. Look, right now, we're in test mode. I would say that we're looking across a couple of dimensions. I would say we're top of funnel, lower funnel in terms of our spend. We're doing some brand spend at the top. We're also looking for conversion down at the bottom. I'd say we're spending in the U.S. and international markets. Right now, I've given you a couple of bad crumbs over the last couple of quarters. on how much we've spend. We spend about low single-digit percent of revenue last quarter. This quarter, we're kind of low mid-single digits percent of revenue. To be honest with you, Tom, we don't have sort of a pinpoint number that we're going after. We're really, at this point, looking at that quality user. We're looking at the ROI and we're looking at the retention curves of people that we're bringing on to the platform. That's really what we're focused on. If we find an area that makes sense, we're not afraid to spend. Obviously, we have a P&L that we're continuing to show that we can both grow our business and grow it profitably.

And so we do have that ability to invest. I think really right now, we're trying to understand how we can really drive that usage on our platform. And if we find an area that makes sense, we're not afraid to invest behind it. But if we don't see that, we won't be putting a ton of money behind it. So that's where we are. We're really idea driven at this point. and really looking for engagement users. Over the last couple of quarters, we've been kind of consistent in that spend. It could be more than that if we move forward if we're starting to see the traction in certain markets or with certain initiatives running.

Our next question comes from John Colantuoni from Jefferies.

In your new marketing campaign, talk about returns and learnings so far? And maybe you could just sort of help compare how engagement for the users who come to you through performance ads compared to your existing users? And second, as you track engagement of these users acquired through performance channels, how does conversion to log in compare to overall company averages?

I can take that. Good questions. Let me start with some examples. So we do -- we've done a little bit of brand work. For example, we did a campaign in France, countries outside of the U.S. where our awareness and consideration is lower than in the U.S. because we're newer. We think we need to make some investment at the top of the funnel, very beginning of that journey. But things we like from that were the fact that we saw an increase in Reddit app installs as a result of a brand campaign, which I think is good. And we saw a movement in brand awareness and consideration, which I think was also positive and provides a foundation for performance later.

Obviously, with things like that, you want to keep on being top of mind, et cetera, and that's work that you have to continue to do. But I think there are some good learnings there. I think over time, we can probably toggle how we think about brand and performance as the awareness sticks in some of those new markets outside of the U.S. So just to give you an example of the kinds of things that we're testing.

On the performance side, I'd say it takes -- we've never marketed. So until recently, we really haven't spent a lot of money on marketing. And so there is some apparatus that you have to build in terms of the infrastructure for marketing and targeting, et cetera. And so the spend that we've done since we turned it on has allowed us to learn there. There's still more to learn. I think we -- what we're excited about is the opportunity to grow specific audiences -- so if you look at Reddit in the U.S., for example, we have very robust content in parenting, in sports, in gaming. But yet when you look at the audiences that are available in those areas, like how many parents there are in the U.S. that could come to Reddit and have a great experience, about half of them don't even think about Reddit for parenting, only 1/4 of them are on Reddit today. It's a really big opportunity. That's both a little bit of awareness and a little bit of performance that needs to go into that.

And there's a little bit of work that we're doing in thinking about the landing page experience for that. Like when we bring them in and show off that we have great parenting content, we bring them in like what do we show them first? And maybe it's a variety of different content from different communities from dad and Mammit and parenting, et cetera. So that's where we're really testing to see where we have the best residence for that audience. And as we go through the testing with one audience group, we want to expand to others. We see a lot of verticals where we have this opportunity. So that's kind of how we're approaching it.

Our next question comes from Naved Khan from B. Riley Securities.

Great. Two questions for me. One, maybe just on the simplified onboarding flow. Are there any early results you can share in terms of how that effort is going? And then maybe just another one on referral traffic from AI chatbots. Just trying to understand how meaningful is that in terms of your overall traffic? And what kind of trends you're seeing there? Anything you can do specifically to improve that? Or maybe it's not necessarily very, very important to you?

Great. Thanks for the questions. So on simplified onboarding, we're launching kind of a revamp of that relatively soon to get early results. I think intuitively, it makes a lot of sense. Reddit, we believe, has some of the best content on the Internet. But today, it's behind a couple of screens of interrogation before you actually get to see it. And so really streamlining that or even removing it are the things that we're putting in the test shortly and making sure users are landing on speeds that are relevant to them. Jen was alluding to some of that, where users are coming from specific channels with specific interest, making sure the content matches their expectations and what's going to work for them. So it's still very early there, but we're excited about where that can go.

Second question on traffic from chatbots. They're not a traffic driver today. I think our relationships with the companies that we work for or work with directly are healthy, and we both learned a lot over the last couple of years, really the value of Reddit's data and where our respective products can go and how we can help each other. So I'm looking forward to continuing to work on these things with these partners, but they're not a major traffic driver today. But I think there's plenty of opportunity there as we continue to work together.

Our next question comes from Jason Helfstein from Oppenheimer.

I'll just start with the LLM licensing. Is there any kind of color or just thoughts around progress with LM licensing deals with both either your existing partners or non-partners? And then for those companies that you're kind of involved in lawsuits with, perhaps just share what is their logic? They think they can just take your IP without paying for it? And then just a quick follow-up. Is there any kind of deals you could do to capture identity for logged out users that would help with ad targeting, whether it's like a JV or partners?

Okay. Thanks for the questions. On LLM licensing, no news to share here. Our relationships are very healthy and collaborative. As I mentioned, I think we've both learned a lot. And I think we've better identified the areas where we can mutually help each other's products and create better consumer experiences. So I'm looking forward to continuing to work through that with our partners there. But I think we're in great shape. Second, on the lawsuits, I can't add anything on that. Our complaints are worth a read. There's, I think, lots of information in there. I think you captured their logic, but I don't want to suppose it. But at the end of the day, look, our job is to protect our data for our business, for our users and for our paying partners.

And finally, I think your third question was capturing identity of logged out users. Look, all of Reddit is really built around this idea of connecting users with their interests. So not necessarily what or who they are, but what they're into on Reddit. And so that's how we're different than some other platforms. We don't need to know who you are or necessarily even how old you are or other demographics because we look at your explicit interest on Reddit, right? Are you part of the skiing community, you're probably in the outdoor stuff. Are you coming from a parenting blog, you're probably a parent. And so that's generally how we think about it. And I think it's a little bit of a different model, but I think it's better for user privacy, and we can target on, I think, a unique but really powerful dimension.

Our next question comes from Andrew Boone from Citizens Bank.

I wanted to go back to logged-out users and talk about users that are coming in from search. Can you guys talk about the product road map of improving that experience? And then one for Jen. Jen, can you just talk about lower funnel products that you're excited about for '26? What gets you most excited? And kind of what's the biggest near-term impact that you think investors should be thinking about?

Okay. Thanks, Andrew. First question on logged out users coming in from search. Look, our focus is on growing logged in app users. And so we do that in 2 ways. One, of course, we want to convert some of those search users into logged in, and I think there's more we can do there. I don't think that's going to be our best channel long term just because of what the user is doing, right? They're running a search. They might be on the Internet to get off the Internet. But I do think we can do more there. For example, something we've been doing this year is showing those users not just the direct post they're arriving on, but also a Reddit answer summary of the topic that that's about. And that has helped to increase engagement from those users.

So there's plenty we can do there. But I actually think the biggest opportunity are the users who are opening the Reddit app for the first time. These are the users who are coming for the community and conversation product. And I think we have the biggest opportunity here to give them a better experience, improve their retention, which will obviously compound into more app growth. So that's the cohort that we care the most about. Second question, Jen, was lower funnel products.

I think I love talking about the lower funnel, and I am excited about a lot of things. So I'll just pick 3. One is the engine automation, which we've been testing, really excited about that to make our platform easier, more accessible. I think that allows for the thousands of advertisers who aren't on Reddit today, some of them small to make it easier for them to activate and onboard on to Reddit and then allows us to deliver even more performance. We love making the impressions work harder for our customers and delivering more outcomes for them.

The second is shopping. Shopping is something that we're really pleased with the results that shopping or DPA delivers. And we had a partnership with Smartly that we announced and a piece of that is also just doing work together on shopping, which we're excited about. And so feeling really optimistic of the opportunity around shopping. So that's another piece and also how shopping come alive on our platform in general. And then the third is the ongoing work we're doing in App Install. We've been working on our measurement there and the attribution and this journey of becoming a SAN. And that can, I think, be very powerful in terms of measurement, making sure that advertisers see all the value we're delivering and then two, for signals that go into the ML for even stronger optimization for app install.

Our next question comes from Josh Beck from Raymond James.

I wanted to discuss the onboarding flows a little bit. It obviously has historically had quite a few steps and quite a few kind of tiles to choose interest. I think the goal is to simplify that. I'm just kind of curious, as you've done the experimentation with the new flows, is it getting to a place where it's maybe closer to going GA? Or how should we think about maybe what you've learned so far? And how should we think about maybe the rollout there?

Thanks, Josh. Great question. Yes, lots of steps. We want to get rid of those steps. I think the best -- the best pitch for Reddit is Reddit's content and making sure that first feed is amazing. And one of the big developments that we've had over the last couple of years since we released the kind of onboarding as we know it, the topic-based selection is our machine learning feed is much more capable, and it's actually the top driver of new subReddit subscriptions today. And so getting users into that feed sooner and letting the feed and the ML do the work of making good community recommendations. So we're pushing very hard here, getting some things in the test and then hopefully beyond as soon as possible because I think this is one of our biggest levers.

Our next question comes from Doug Anmuth from JPMorgan.

I apologize if this has been asked, but there's just been a lot of discussion around how Reddit shows up on search and on large language model results. Can you just help us understand how that ties to the value of your data licensing deals? Or do you view these as kind of 2 more distinct or separate items?

Thanks for the question, Doug. Look, I think our relationships with the kind of search and LLM companies are multifaceted, right? Their products are different for sure. And so we look at, I think, all of the different ways that there can be a value exchange. Look, our top priority is growing the Reddit community and conversation product. so really helping our flywheel go faster. And I think looking the other direction, we can help these companies deliver kind of better search results in those moments. And so that's our attitude or that's our position in this space is how can we make -- like how can we use these relationships to grow the core Reddit product.

I'd say, I guess the color commentary there is I think our relationships are as healthy and collaborative as ever. And so we're, I think, having interesting conversations on how we can help each other do this because we've learned so much over the last couple of years, I think we got into this relationship and maybe perhaps a a simpler place. But now I think we mutually have much more confidence in where our products are going. And of course, I'll just remind everybody that our core business is ads, and that's really the driver of Reddit's revenue.

Our next question comes from Rich Greenfield from LightShed Partners.

I guess, Steve, more than anything else, you've talked about 50% of your traffic comes direct and 50% from Google. I guess if you just think from a very high level, what are the top 3 or top 5, whatever the best number to think about is, what are the best drivers of someone becoming a Reddit app user? Like what determines that activity? Because that's obviously where you make your money and what is the biggest determinant of your success.

Thanks for the question, Rich. I'd say those numbers are approximate, but pretty close. Look, the way somebody comes to Reddit user, an app user is they install the app and they find amazing content. We see a lot of new app users every day and plenty of what we call like a reinstall or an opportunity for a reengagement every day. And so this is why I keep bringing your and our team's attention back to that first open experience and making sure there are no barriers between the user and seeing content on Reddit because the biggest driver of retention is following subreddits that are relevant to your interest. And so it's not rocket science. Now Reddit is very, very broad, and we don't always have a lot of information coming in. And so we do have to do that work.

Our machine learning there has gotten much better. And then Jen was earlier describing opportunities where we know where a user is coming from, from a particular content source, whether it's a category source, so call it parenting or gaming or TV shows or whatever, to give them a tailor feed as well. And so that's really the way that we think about it. I think we have enough shots on goal here every day that improving this process will make the whole Reddit machine run much more efficiently.

Our next question comes from Benjamin Black from Deutsche Bank.

Jen, I guess, can you talk a little bit about the operating environment you're seeing as we head into the 4Q holiday shopping season? And what assumptions have you baked into the guide from a macro perspective? And then secondly, Drew, one on margins. I guess, no good [indiscernible]. You already hit your margin targets that you laid out at the IPO. So when we look ahead, your incremental margins are sort of hovering around the 60% range. How should we think about potentially sort of updated margin targets?

Great. I can take the first one. Look, I'd say the macros -- for us, the market feels largely stable, broadly stable, but I'd say there's low visibility. I'd say tariffs are on the minds of some of our customers Efficiency is important. We're certainly delivering that. And we're definitely counseling our customers as they're navigating through a very dynamic environment and as they're thinking about investment across the funnel. I mean the great news is we have a full funnel offering. So we can meet their needs, I think, broadly. So I think it's broadly been stable in Q3.

Ben, on the margin side of things, you're right, that was our target, that 40% margin that we talked about. That was our North Star during the IPO. It's nice to hit it. 6 quarters in. So that is something. The guide you probably picked up on in the fourth quarter is even higher than 40%. I think how we think about it is -- and the North Star is going to be something more than 40. We're thinking that it's probably in the 50 range. That's our North Star. I think it's a couple of things are important on the day-to-day and kind of the near and midterm. Obviously, we want margins to be higher and they will go higher. It won't be every quarter. I think that's the piece that I want to make sure that people understand here.

We're really building a business, and we'll invest in things where it makes sense, right? You have a 90% gross margin, you just have the ability here to really do special things if you can get growth. And so there may be times that we'll have to invest in our business periodically. I think right now, we're doing fine and things continue to scale well. But for a North Star, I think 50 makes sense. I think in the medium term, we'll be focused on better than 40, like that's how we'll be thinking about it. And then remember that our business won't always be that way quarter-to-quarter. We reserve the right to be strategic to grow our business.

Our next question comes from Ken Gawrelski from Wells Fargo.

Two, if I may, please. Two probably directed to Jen. First, could you talk about -- I mean, first, impressive expansion of the advertiser count again this quarter. Jen, can you speak to whether self-serve has become a meaningful part of that advertiser count expansion yet or when it may become meaningful? And then maybe a second one, please, probably also for you, Jen, is could you talk about how marketers may use you for [indiscernible] like generative optimization, AI optimization. Is this a major use case for your advertisers? And could you walk us through your pitch?

Sure. So on self-serve, that -- we do have self-serve today, but it's not a big part of our business. We want to have a self-serve offering, and I think the end-to-end automation work that we're doing will be a great step in that direction for more advertisers who want to operate on a self-serve basis. But it has been the focus. I mean our focus is on the advertisers who really have a lot of significant budget who do want somebody to talk to some -- in a lot of cases. So they're in our managed segment, either our large customer segment, mid-market or even our managed SMB segment, where they provide some light counsel to them, and we're in like what I would call a hybrid configuration where we're kind of both hands on keyboard working together in a light way.

Our strategy is to maximize the opportunity across the biggest part of the market, and that sits right now in the managed segment and to optimize like put the customer in the right service channel that maximizes their experience and their ability to spend on Reddit. So we're not religious about self-serve. I think we're really focused on the right service model for the right advertiser to be successful on the platform and get what they need. But I think self-serve is something that we're interested in as we build more automation.

The second one was about optimizing for, I guess, LLMs. And look, I think Reddit's corpus of information is clearly incredibly valuable and helpful to LLMs because it's human conversation that's fresh, it's authentic. It's just distinctive. There's nothing like it. And we know that LLMs appreciate Reddit's conversation. But when marketers come to us, they're coming to us because that conversation is on Reddit and for the opportunity to find customers and engage those customers in an environment where that conversation is happening because when they're in that environment on Reddit, they're getting the engagement converting to outcomes that help them grow their business. So I don't think it's about the influence in LLM. That's a secondary product of our core amazing platform, the conversations and communities. What the marketers are getting is real value from the Reddit platform itself in terms of converting that engagement to real business outcomes for them. It just so happens that, that environment of that conversation is also appreciated by LLMs. But that environment is on Reddit.

Our next question comes from Rohit Kulkarni from ROTH Capital Partners.

A couple of questions. One on user mix as engagement has risen and number of users have risen. Can you talk about how the mix has evolved over time over the last couple of years, maybe in terms of people who actively contribute versus we just come in there to consume or then there are those in between people who kind of amplify through voting and sharing content? And then the second is on ARPU, any drivers on underlying ARPU growth? How much is ad load contributing to ARPU growth versus other factors?

Thanks for the questions. On user mix, yes, there's been some movement there. I'd say it's in a fairly consistent range. It's something we think a lot about. We haven't talked about it much on this call. Well, we did a little bit. So our strategy around contribution is -- when we say that, we're really referring to helping new users post successfully on Reddit and eliminating like roadblocks there, one of which we're working very hard on, which is when a user shows up to Reddit and they want to contribute, but they may not be aware that there's a bunch of rules in the community they're writing to. And so we try to catch that early in the journey to give them feedback or find them other places to submit. So that's been testing very well and improving kind of the contributor mix there.

And then Reddit does have multiple ways of contributing. You described a cohort of users that we colloquially call the lurers. These are people who don't write comments, but they vote. And the voting is very important for ranking. And today on Reddit, you can't leave a comment or a vote unless you're logged in. And so getting more people logged in, so this brings us back, of course, to onboarding and those flows, getting people through logged in more successfully, relevant communities more successfully, removing barriers to contribute and finding content they like to increase the voting and engagement are all things that kind of push us in the, I think, in the healthy direction. I think there's a lot of opportunity here because there's friction at each of those steps. And then the second question, Jen, was ARPU and ad load.

Yes, sure. I can take that one on ARPU. So just a reminder, our strategy is to make every impression more valuable by delivering hard outcomes, more clicks, more conversions. In Q3, we saw eCPM grow, but the quarter had impressions grow was a bigger contributor. There are 3 components that drove the impressions. One is user engagement and then also ads and comments and then also a temporary operating point that we had when we had a balancing supply and demand in ad load.

Just to be -- just to address ad load directly. So our ad load overall, if you look at the fee compared to peers, is much lower than our peers. And it is not a core part of our strategy to increase ad load. Our strategy is to make every impression more valuable and to design ad units for spaces where we don't have ads like ads and comments. It is an operating point that we do use when we have supply-demand tightness to make sure that the marketplace is consistent for our advertisers. And so we did use that lever temporarily in Q3, but we turned it back. So that's kind of the contributors of impressions in the [indiscernible].

Our next question comes from Youssef Gully from Truist Securities.

This is Robert on for Youssef Squali. Just one for me. It seems like new types of AI content are rising and users are also consuming more video. So just curious what Reddit's strategy is in this environment. And if you're focused on building out answers and integrating publishers, does that imply that the focus of content is still going to be predominantly text-based?

Great question. So there's a couple of dimensions to this. So our very high-level positioning for Reddit in the AI era is that Reddit is for humans by humans. And so yes, there's plenty of AI content on the Internet. And -- but we want Reddit to be a place where humans talk to other humans or people talk to people about the stuff that they're interested in. Now every post on Reddit, which they can be a link, text, image, video, mean, gift is really a prompt for conversation. So in terms of what the post is, we don't have a strong feeling there. We just want more posts, and we want to continue to expand the post types that Reddit support, so kind of evolving with the time.

And developer platform, which we haven't talked much about today, is one of our big ways of doing that. So we're seeing all sorts of new posts on Reddit. Users have rebuild polls. We've got lots of games. There's stock charts, all sorts of things. But really, all of these things serve as prompts for conversation. Video on Reddit is and has been for a while, our fastest-growing content type. Even though we don't think of Reddit as a video platform, I think there's a lot of headroom for video on Reddit, both as post, which is what we see today, but also using video and then potentially down the road audio just as a means of communication. I think there is a kind of very uniquely Reddit way of doing video.

One of the things that I'm very excited about is we did our first video AMA just a couple of weeks ago. So this was done by NASA, so you can find it. And in this case, NASA hosted the AMA, but all of their astronauts answered in video within the Reddit comments. I think this is a really nice way of letting people kind of like really bring their charisma to these moments. And video comment replies is kind of this interesting marriage of video, the modern content format, but in the context of a conversation as opposed to kind of the long-form, short-form influencer stuff you might see on other platforms. So we always try to think like what's the Reddit version of this content format. And I think there might be some opportunity there.

And then in terms of publishers, yes, look, text isn't going anywhere. Text, you can read quietly. Again, it serves as good as anything as a prompt for conversation. Now with AI, you can turn text into audio for background listening. And so I don't think video or AI video replaces text any more than movies replaced books. Really, what happens is the content pie just keeps getting bigger and bigger, and we want to make sure everything works on Reddit.

Julien, this is Jesse. I think we're kind of bumping up in time here. So I just want to thank everyone for joining. We appreciate it. Look forward to speaking again soon.

Thanks all.

Thanks, everyone.

This concludes Reddit's Q3 2025 Earnings Call. You may now disconnect.