Date: 2026-02-25 Quarter: Q4 FY25 (Dec 2025) Thesis Going In: Strengthening | Position: 7.3% (shares only)
Stellar quarter. Reddit put up $726m in Q4 — +70% YoY, beating guide by $66m (+10%). Full-year FY25: $2.2B revenue, $530m net income. EBITDA margin hit 45%. FCF $684m for the year. Rule of 115 achieved (70 + 45).
But the revenue number is not the most important thing here. The ARPU story is.
ARPU grew 42% YoY to $5.98 while DAUq only grew 19%. That divergence — monetization outpacing user growth — is exactly what you want to see. It means the ad machine is working and improving independent of how fast the community grows.
Internationally, ARPU is $2.31 versus $10.79 in the US. A 4.7x gap. Intl DAUq +28% YoY, Intl revenue +78% YoY. Machine translation is now live in 30 languages. The international monetization gap is not a risk — it's the next five years of growth already embedded in the user base.
Active advertisers +75% YoY. Lower-funnel (DPA/performance) revenue doubled. CAPI conversions tripling for 4 consecutive quarters. This is not just adding advertisers — it's the ad platform maturing toward measurable ROI.
| Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | |
|---|---|---|---|---|---|
| Revenue ($m) | 427.7 | 392.4 | 500.2 | 584.7 | 726.0 |
| YoY Growth | +71% | +61% | +78% | +68% | +70% |
| Gross Margin % | ~91% | ~91% | ~92% | ~92% | 91.9% |
| EBITDA Margin % | ~32% | ~33% | ~40% | ~40% | 45.1% |
| FCF Margin % | ~28% | ~27% | ~37% | ~32% | 36.3% |
| DAUq (m) | 101.7 | 108.6 | 112.8 | 116.9 | 121.4 |
| DAUq YoY | ~27% | +24% | +22% | +21% | +19% |
| ARPU (DAUq) | $4.21 | $3.61 | $4.43 | $5.00 | $5.98 |
| ARPU YoY | +34% | +30% | +46% | +38% | +42% |
| WAU (m) | 379.9 | 395.5 | 430.2 | 454.4 | 471.6 |
The trajectory here is what's remarkable: six consecutive quarters of 60%+ YoY growth, gross margins at all-time high (91.9%), EBITDA margin expanding from 32% to 45% in four quarters. Operating leverage is structural and accelerating.
Q1 FY26 guide is $595–605m — +53% YoY, implying seasonal QoQ decline of ~17% (normal for Q1). After four consecutive beats averaging +11.2%, the real Q1 likely prints $650–670m.
The more important question is whether 50%+ growth is sustainable through FY26. I think it is, for two reasons:
ARPU has enormous runway. US ARPU $10.79, intl $2.31. Even getting intl to $4-5 over 6-8 quarters (less than half the US rate) drives massive incremental revenue with zero user growth required.
Reddit Max. Self-serve premium subscriptions rolling to GA in 2026. At even 1-2% WAU conversion at $5-8/month, that's $250-450M incremental at near-100% gross margin. This could be the next leg.
Google search dependency is the real structural risk here. Management doesn't quantify it. An algorithm shift wiped out traffic for plenty of publishers. Reddit's authentic content is supposedly what Google needs — but that dependency cuts both ways. I'm watching this closely.
The metric transparency sunset (removing logged-in/out distinction by Q3 FY26) is also worth noting. Management says they're moving to more relevant metrics. Fair enough, but it removes a signal I track for content quality and community health.
At $26.5B market cap, 2.5Bnetcash : EV 24B. TTM revenue $2.2B. EV/TTM Revenue ~10.9x. TTM FCF $684m. EV/FCF ~35x.
For a 70% grower with 92% gross margins and 45% EBITDA margins — this is cheap. PEG ~0.47. Comparable to META at 8x for 22% growth. I'd pay 15x+ for this.
The $1B buyback at ~12x TTM revenue says management agrees. $2.5B net cash, zero debt — they have the balance sheet to act.
| Factor | Assessment |
|---|---|
| Revenue Growth | STRONG — 70% YoY, 6 consecutive quarters 60%+ |
| Trajectory | STABLE/STRONG — sustaining at scale, beat-and-raise pattern |
| Gross Margins | HIGH — 91.9% ATH, structural |
| Dominance | STRONG — authentic human content moat vs AI-generated web |
| Valuation | CHEAP — 10.9x EV/TTM for Rule of 115, PEG 0.47 |
| Special | YES — intl ARPU gap 4.7x, Reddit Max, data licensing, $1B buyback |
Thesis is Strengthening. Position: 7.3%, shares only.
This is my most compelling add opportunity in the portfolio right now. The stock is priced for a growth slowdown that isn't happening. ARPU expansion + intl monetization + Reddit Max = three compounding vectors. At 12x TTM for a 70% grower with 45% EBITDA margins, the margin of safety is unusually high.
I'm adding. Best risk/reward in the portfolio.
We will see what happens...
GR