Date: 2026-02-22 Quarter: Q4 FY25 (ended Dec-25) Task: Earnings Review
Well, what can I say! Reddit just put up some really, really preposterous numbers for Q4 2025! Revenue of $726 million, up 70% year-over-year, smashing consensus of $665 million by $61 million — a 9% beat! And EPS of $1.24 versus $0.94 expected — that's a 32% beat on earnings! That is such a remarkable result for a company at $2.2 billion in annual revenue!
But I have to be honest with you. I follow the money, the results — and there are a few things I need to watch carefully here. This isn't a SaaS company with nice recurring revenues. This is an ad-driven platform. And I've been burned before by companies where the growth was real but the durability was in question. So let me walk you through what I see.
| | Q1 FY24 | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | | | Mar-24 | Jun-24 | Sep-24 | Dec-24 | Mar-25 | Jun-25 | Sep-25 | Dec-25 | |---|---|---|---|---|---|---|---|---| | Revenue ($M) | 243 | 281 | 348 | 428 | 392 | 500 | 585 | 726 | | YoY % | 48% | 54% | 68% | 71% | 62% | 78% | 68% | 70% | | QoQ % | -3% | +16% | +24% | +23% | -8% | +27% | +17% | +24% | | Gross Margin % [GAAP] | 88.6% | 89.5% | 90.1% | 92.6% | 90.5% | 90.8% | 91.0% | 91.9% | | Adj EBITDA Margin % [Adj] | 4.1% | 14.0% | 27.0% | 36.1% | 29.4% | 33.4% | 40.3% | 45.1% | | Net Margin % [GAAP] | -2.4% | -3.6% | 8.6% | 16.6% | 6.7% | 17.8% | 27.9% | 34.7% | | FCF ($M) | 29 | 27 | 70 | 89 | 127 | 111 | 183 | 264 | | FCF Margin % | 12.0% | 9.7% | 20.2% | 20.9% | 32.3% | 22.2% | 31.3% | 36.3% | | EPS (diluted) [GAAP] | -8.19* | -0.06 | 0.36 | 0.36 | 0.13 | 0.45 | 0.80 | 1.24 | | DAUq (M) | 83 | 91 | — | 102 | 108 | 110 | 116 | 121 | | ARPU ($) | 2.94 | 3.08 | — | 4.21 | 3.63 | 4.53 | 5.04 | 5.98 |
*Q1 FY24 EPS distorted by $1.1B one-time IPO-related SBC charge.
The trajectory on revenue is: 48% → 54% → 68% → 71% → 62% → 78% → 68% → 70%. Peak was Q2 FY25 at 78%. We've been running essentially flat at 68-70% for three of the last four quarters. That's not acceleration — but it's also not deceleration in any alarming sense. 70% growth at $726 million in quarterly revenue is extraordinary!
The concern is the Q1 FY26 guide: $595-605 million, which implies 54% YoY growth. That IS a meaningful step-down. Now, management has a clear pattern of conservative guidance — they beat Q4 by 10%! — so I'm not panicking. But I want to see Q1 actuals before adding meaningfully.
Here's what gets me excited! This is not really a user-growth story anymore. It's a monetization story. And the monetization numbers are just extraordinary!
Do you understand what this means? The ad platform is maturing faster than anyone expected. More advertisers are coming in, and each one is spending more per Reddit user. That's a compounding engine. And with 471 million weekly active users who are only generating $5.98 per DAUq per quarter — versus Meta at $50+ per user annually — the monetization gap to close is enormous!!!
International daily users are +41.5% year-over-year — 68.9 million users versus 48.7 million last year. That's where the user growth is. But international ARPU is only $2.31 versus US ARPU of $10.79. That is less than ONE-FIFTH of US monetization!
Should we run away from this??? Of course not! That's the opportunity! If Reddit closes even half the gap between international and US ARPU over the next three years — while international users keep growing at 40%+ — that's a massive growth vector that isn't even in the numbers yet! International revenue grew 78% year-over-year in Q4. The inflection is happening!
This company is producing genuine profit at scale. Not some adjusted number with 47 add-backs — actual GAAP net income of $252 million in Q4, a 35% net margin! Full-year 2025 GAAP net income of $530 million! Free cash flow of $684 million for the full year, more than tripling 2024's $216 million!
And the margin expansion trajectory: Adj EBITDA went from 29% in Q1 FY25 to 45% in Q4 FY25 in just four quarters. That's not incremental improvement — that's operating leverage kicking in hard. The gross margin is 92% [GAAP] and has been stable. Every incremental revenue dollar is flowing to the bottom line at enormous rates.
2.5billionincash, zerodebt, firstbuybackprogram(1 billion). This company has become a cash machine!
The deceleration question. Revenue growth is plateauing around 68-70% YoY after peaking at 78% in Q2 FY25. The Q1 guide of ~54% is a concern. Two more quarters of 54% would constitute the deceleration pattern I take seriously. One quarter does not. I'll watch Q1 actuals carefully.
US ARPU sustainability. Growing US ARPU 164% in one year is remarkable — but it cannot keep growing at that rate. The question is where it plateaus. If US ARPU stabilizes at $12-15 (from $10.79 today) while user volume grows slowly, the math still works beautifully. If it peaks here, the growth engine has to come entirely from international, which is much earlier stage.
International monetization execution. This is the key variable. International DAUq is already larger than US DAUq (68.9M vs. 52.5M). The ARPU gap is huge. Reddit Max (AI campaign platform), new language expansions, and brand verification are all pointed at this problem. I want to see international ARPU continue the Q4 inflection ($2.31, +25.5% QoQ).
Google dependency. A significant part of Reddit's traffic surge is driven by Google's algorithm update that favored Reddit in search results. That's an external tailwind Reddit doesn't control. Any algorithm reversal would be a headwind. This is my biggest structural concern.
Reddit is not a SaaS company. I've been evolving on non-SaaS as the years go on — Nvidia, Axon, Samsara all proved that what matters is revenue growth durability, not the business model label. The question I always ask: is this company's growth durable?
For Reddit, the durability case rests on:
On the other hand: ad-driven revenue is more cyclical than subscription. A macro downturn hits ad budgets. And Google dependency is a real single-point-of-failure risk.
Atlas gave this a Conviction 4/5 and I'm largely in agreement. The quarter was exceptional. I'd note that Atlas highlighted the Q1 guide concern correctly — that's the right thing to watch. Where I add nuance from my framework: the active advertiser growth (+75% YoY) is the leading indicator I care most about. More advertisers = more competition for Reddit inventory = higher ARPU. That virtuous cycle is in early innings.
The PEG ratio argument Atlas makes (0.41x) is compelling. At 70% growth with a ~29x P/E, this is not expensive.
HOLD — accumulate on weakness. The Q4 results are exceptional and the fundamentals are intact. The Q1 guidance deceleration is worth monitoring but consistent with management's conservative guide-then-beat pattern. I would not add aggressively until I see Q1 actuals confirm the 54% guide was sandbagging. If Q1 comes in at $640M+ and Q2 guides back toward 60%+, this becomes a more aggressive add.
The stock pulled back ~8% post-earnings on guidance concern. Given the underlying results, that pullback looks like an opportunity — but patience here is warranted. Let the Q1 print confirm the trajectory.
Best, Saul