Reddit Q4 2025 earnings conference call
Key Takeaways (AI-Generated)
Financial Performance
- Q4 revenue grew 70% year-over-year to $726 million, with full year revenue reaching $2.2 billion, up 69%
- Net income hit $252 million in Q4 (35% of revenue), with full year net income of $530 million
- Adjusted EBITDA reached $327 million in Q4 (45% of revenue), making Reddit a Rule of 115 company
- Free cash flow crossed $264 million in Q4 (36% of revenue), demonstrating strong cash generation capabilities
Business Highlights
- Advertising revenue grew 75% year-over-year to $690 million in Q4, driven by performance ads doubling
- Daily active users grew 19% year-over-year to 121 million, weekly active users up 24% to 471 million
- Launched Reddit Max Campaign AI-powered platform in public beta, delivering 17% CPA reduction and 27% conversion lift
- Released Reddit Answers in five new languages, with search queries growing from 1 million to 15 million quarterly
Financial Guidance
- Q1 2026 revenue guidance of $595–605 million, representing 52–54% year-over-year growth at the midpoint of 53%
- Q1 2026 Adjusted EBITDA guidance of $210–220 million, representing 82–91% year-over-year growth with a 36% margin
- Stock-based compensation expected to remain in the high teens as a percentage of revenue for 2026
- Plan to maintain over $1 billion in cash on the balance sheet, consistent with the capital framework
Opportunities
- International revenue grew 78% year-over-year, indicating strong global expansion potential for future growth
- Developing AI-powered search features and personalization to improve user engagement and platform retention rates
- Expanding API partnerships and evolving relationships with Google and OpenAI from business deals to product partnerships
- Announced a $1 billion share repurchase program, demonstrating commitment to delivering shareholder value while investing in the business
Risks
- Need to preserve platform authenticity amid growing AI-generated content and bot activity challenges
- Managing operational challenge of distinguishing real human conversations from AI-generated content and automated bots
Full Transcript (AI-Generated)
Operator
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press * followed by the number one on your telephone keypad. If you'd like to withdraw that question again, press *1. Thank you. I would now like to turn the conference over to Jesse Rose, Head of Investor Relations. Jesse, you may begin your conference.
Jesse Rose
Thanks, Krista. Hi everyone. Welcome to Reddit's fourth quarter and full year 2025 earnings call. Joining me are Steve Hoffman, Reddit's Co Founder and CEO, Jen Wong, Reddit COO and Drew Valero, 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.
Steve Hoffman
Thanks, Jesse. Hi, everyone, and thanks for joining our Q4 earnings call. 2025 was a breakout year for Reddit. We surpassed bold 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 would 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 three 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 the success. The numbers tell 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-generated content, 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 recommendations from a bot. That trust erodes.
That's why we're actively working on ways to preserve our authenticity and conversation quality. This begins with the launch of verified profiles for brands and individuals in Q4, and we'll 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 and queries 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 five 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 versus logged-out users, but as some of our work to streamline onboarding—such as instant personalization—blurs the line between these states, the distinction between them makes less sense.
As such, we plan to phase out reporting on logged-in and logged-out users 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 and 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 Angela 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.
Jen Wong
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 ads 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. US 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 accounts 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-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.
CBO dynamically allocates budgets and reduces manual adjustments to maximize performance and lower cost per click for advertisers. Our shopping solution, dynamic product ads or DPA, emerged as a lower-funnel driver in Q4, fueled by strong performance during Black Friday and Cyber Monday. While we are still early in our shopping ads journey, we are growing advertiser adoption and improving performance—since last year’s enhancement, shopping ad ML models delivered over 75% improvement in advertiser ROAS.
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, Cappy-covered conversion revenue tripled year over year, as it did 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 Campaign, our AI-powered campaign platform that uses Reddit 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, we offer advertisers unique Reddit 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. Looking ahead, we believe we are well positioned for 2026, and our ad strategy this year will focus on a few key themes. The first is scaling automation through our Ads Manager and Reddit Max. We plan to use Reddit Max as a foundation to streamline advertiser onboarding, particularly for smaller customers, and enable them to leverage AI-powered tools and automation to simplify campaign creation—from setup to creative—and augment performance from optimization to campaign insights.
Through 2026, we plan to expand access and build automation that leverages Reddit's 24 billion posts and 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 significant headroom to scale our ML models and drive more outcomes and performance. For shopping ads or DPA, we're improving relevancy and ad format to enhance advertiser ROAS and the user experience. For app ads, we're optimizing the ads to drive more in-app actions, which 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 demonstrate Reddit's impact. The third theme is expanding the Reddit for Business ecosystem. Our strategy is to build partnerships around our Reddit-unique community insights and tools to expand our connections to global brands and businesses.
Building on our API partnerships with Smartly and WooCommerce, we are expanding our partner ecosystem to scale audience reach, creative automation, and full-funnel measurement. Finally, as more businesses leverage Reddit as a signal for ever-evolving consumer intent, AI-powered insights from Reddit Community Intelligence can accelerate how brands turn community conversations into actionable media strategies, facilitating faster product feedback and more strategic consumer 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 to Drew.
Drew Valero
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 hit $327 million, 45% of revenue, making us a Rule of 115 company this quarter. Also, diluted EPS reached a high of $1.24, up more than 3x from 2024. Third, for the first time, free cash flow crossed a quarter of a billion dollars, 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's sixth consecutive quarter of over 60% revenue growth. Next, it was also Reddit's sixth consecutive quarter of 90% gross margins. Third, stock-based compensation expense was below 20% of revenue, hitting 13% for the third consecutive quarter. 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, or 24% of revenue, and Adjusted EBITDA was $845 million. That’s an incremental margin of 38%.
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 million as we saw broad-based strength across all three sections of the ad funnel.
Other revenue, which includes revenue from our content licensing business, reached $36 million, up 8%. US 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 compared to the prior two quarters, which had averaged about 38%, versus full-year cost growth of 35%. Building on that thought, the main cost driver continues to be operating expenses, which on an adjusted basis were $340 million in Q4, or about 85% of total adjusted expenses. Adjusted OpEx costs grew 41%, driven by investments in two areas: hiring and marketing.
On hiring, our pace was similar to prior quarters. The company ended with 2,515 total headcount, up 14% versus last year and up about 3% sequentially from Q3—the same pace as in 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 remains strong, delivering multiples of the cost.
G&A headcount was lower than last year and about the same as at year-end 2023, as we continue to leverage back-office resources. 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 two 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 both volume and price. Price increases were driven by seasonality—as media costs rose in Q4 versus Q3—and geography, as most of the spend was targeted in the US market. On the brand side, we launched new audience campaigns focused on areas like parenting, entertainment, and sports, which yielded some encouraging results, but there’s more to do.
So rounding out Q4 with a few more numbers, Reddit 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 a billion dollars 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 three 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-in acquisitions 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 three priorities. We plan to be in the market from time to time to buy shares opportunistically. We'll continue to be prudent about financial management, targeting to keep over a billion dollars 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 logged in or 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 US and international DAU and WAU 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 two 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 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 from Q4 expenses. I'll also share a thought on full-year stock-based compensation expenses.
SBC 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 into meaningful cash flow and returns for our shareholders. That concludes my comment. Let me turn the call back over to Steve.
Steve Hoffman
OK, thanks, Drew. Not only here, we will take a couple of questions from the community. First, I want to acknowledge the Reddit stock community and their earnings call 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' at times. Thank you all, love you.
OK. Question from the community. Why do a buyback instead of putting that money towards future growth and product initiatives instead?
Drew Valero
Yeah, I'll take that one, Steve. I think the short answer is we can do all three of our 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 great companies, they're leading creators of total shareholder returns.
It's obviously the revenue growth and the margin expansion that drives it. But the good companies that are leaders in TSR for their shareholders 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 three 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, and cash is very close to that, you know. So we want to keep working capital on the balance sheet—about a billion dollars in cash, as it were.
And so you now have the ability to do all three priorities, which we haven't had before. You know, obviously the business last quarter had a terrific quarter. Cash flow was $264 million. What you're seeing is the model starting to inflect, and you're seeing the model really shine. You know, 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 where it makes sense; and third, share repurchases will be done opportunistically in the market from time to time when it makes sense.
Steve Hoffman
Great. Thanks, Drew. Thanks Steve, Jen, Krista, let's please open up the line for questions from the folks there.
Operator
Thank you. Thank you. I would like to remind everyone in order to ask a question, press * then the number one on your telephone keypad. In the interest of time, we ask that you limit yourself to one question. Thank you. Your first question comes from Ron Josey with Citi. Your line is open.
Ron Josey
Hey, thanks for taking the questions. Maybe one for Steve on product and one for Jen on Reddit Max. So Steve, you know, given the amount of commentary and focus on 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 talked about early benefits, maybe on the onboarding flow change around retention and then on search and integrating search with answers.
Any impact there? Talk about the impact of user experience. So that's on product. And then Jen, you mentioned Reddit Max to be used to streamline onboarding. We'd love to see how you believe that that might roll out throughout the year and if that and how that panel mix might evolve across that its advertisers being large, medium and SMBs. Thank you.
Steve Hoffman
OK, 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, to help triangulate users' interests.
I think one of the other learnings also, I think it's pretty straightforward. Bringing users into the feed faster requires the feed 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, yeah, we did bring the search bars together for the most part. So you're on the search bar, you can, you can go into Ask and then if you run a traditional search it will often pop an answer there—read answers queries. I believe we're up from 1 million to 8 million. Excuse me. Thank you, Jesse. From 1 to 15 million queries over the last year, and then 60 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 a more flexible way to respond to the wide range of things that users ask.
Jen Wong
OK. And then Jen, the question to you was, yeah, inverted Max. Yeah, so thanks for the question. So right now, we're in the process of converting our lower-funnel advertisers onto Reddit Max. Obviously, there are thousands of advertisers that need to be converted. That's, you know, an effort. So that's where we're focused first—for existing customers to have that experience.
They're very familiar with Reddit, and so, you know, I'd say it's still a few quarters out before we really start onboarding new advertisers because we're so focused on conversion right now. But if I zoom out, you know, 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 those benefits of the creative and the optimization.
So, you know, I think this—we think this will remove more friction and help us continue with our acquisition growth.
Operator
Your next question comes from the line of Benjamin Black with Deutsche Bank. Your line is open.
Benjamin Black
Great. Thank you for taking my question. 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. You know, how do you see that evolving from here? Could it ultimately prove additive and support engagement in certain instances? I'm just interested to hear your thoughts there.
And then secondly, you know, in a world where we're moving closer and closer to potentially entering identity-based commerce, I’d love to get a sense—and sort of hear your perspective—on how you think you’re positioned. I mean, I can imagine the value of your data or your content would increase dramatically, but how do you think about the impact on users, contribution rates, and certainly the advertising side of the business? Thank you.
Steve Hoffman
Thanks, Benjamin. OK, 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, and our users do that too. I think there’s also another version of this—you know, we’re seeing more and more of it across the internet, right?
People write with AI, and I think we’re going through this transition right now. In my opinion, it’s kind of annoying, but there’s still a human behind the prompt. And then there’s full-on bot-like behavior—the latter is something we don’t want on Reddit. To the extent that there are automated uses of Reddit, we want those to be part of our developer program apps.
And so we do see things like this on Reddit—the RemindMe bot, the Haiku bot, and things like that. So I think the answer to questions like these for Reddit is almost always transparency and intentionality. At the end of the day, Reddit is for humans to talk to other humans. So to the extent that anything is automated or generated, it needs to be very clearly labeled—but that doesn’t mean we have to outlaw it entirely.
It just needs to be clearly marked as what it is, because there are times when it’s helpful.
Jen Wong
OK, Jen, the question for you is about agentic commerce and how we think about that. Sure. Look, I think Reddit is very well positioned for the changes in the ever-evolving consumer decision journey and extremely well positioned for what’s coming in agentic commerce. You know, Reddit is the place for trusted recommendations. It’s where the actual humans who need to deploy resources and make purchasing decisions go to search for what they’re interested in buying.
I think the next layer—when you do price comparisons, the last click, and the actual transaction execution—could frankly become commoditized, because that’s where the agent will get the job done. But the human remains the final decision-maker on what to buy and how to allocate resources—and that happens at the recommendation stage. Reddit has the best product and service recommendations, and that presence is evident both on Reddit itself and in our partnerships with large language models (LLMs).
So I think we’re really well positioned because marketers will always want to talk to the customer—and the customer is the one who deploys resources and makes those decisions. That position is incredibly important for all marketers and, I believe, for any business.
Operator
Your next question comes from the line of Tom Champion with Piper Sandler. Please go ahead.
Tom Champion
Thanks very much. Good afternoon everyone. Steve, can you talk about the monetization opportunity with logged-out users? Does removing the reporting distinction imply that monetization can move closer to parity between logged-in and logged-out users? And maybe you could just discuss the mechanisms to achieve that, if so? Thank you.
Steve Hoffman
Thanks, Tom. I’ll take that. So both logged-in and logged-out users see ads, and on an impression basis, the value of those impressions is the same. There’s actually no difference between them. The real difference lies in engagement. So our strategy is to increase engagement, right? What we want is for our weekly users to become daily users, and we don’t want being logged in to be a requirement for personalization to deliver the best—or a better—Reddit experience.
And that’s why, you know, we’re making this change to remove the logged-in/logged-out metric, because it will become blurred. It’s all about driving higher engagement. And as the logged-out user receives a more personalized experience and, you know, increases their engagement, that’s where you can extract more value—because with that increased engagement, you’ll be able to serve more impressions per user. So the opportunity lies in boosting engagement through the product improvements Steve mentioned.
Operator
Your next question comes from the line of Justin Post with Bank of America. Your line is open.
Justin Post
Great. Thank you. 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 opportunity around verification? Thank you.
Steve Hoffman
OK, so on. Thanks, Justin. So on the AI deals—really our partnerships with Google and OpenAI—I think we can see the growing importance of Reddit. Reddit per se is the number one cited source in AI answers. Our relationships with both companies are very healthy. The conversation is shifting from, you know, 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 whether we can bring users into the community parts of Reddit, right? Reddit’s product is human connection—it's conversation, it's communities—and we want to bring users into that experience on Reddit, which of course generates more conversation and makes that whole kind of partnership flywheel work better.
So that's where our heads are at right now. But both relationships are great. On things like bots, there’s no user impact—we remove, and have always removed throughout the lifetime of this company, anything we believe is a bot before we share anything with users. But we do see more and more agentic usage of Reddit specifically—someone might be writing a comment with ChatGPT and that sort of thing.
There is already a culture of labeled bots on Reddit. So this is what I mentioned before—the RemindMe bot, the HighQ bot, some things like that. And I think with the Reddit Developer Program, there are more opportunities to expand the functionality of Reddit. But that means those sorts of interactions need to be well labeled.
But the default assumption on Reddit has been and should be that you're talking to humans, because that's what Reddit is for—people talking to people. The AI version of this challenge is just a new chapter in this ongoing issue. We've seen this sort of challenge before—it's really just spam in general that we're talking about. The spam challenge has been something we've been fighting for two decades on Reddit. So this is really an evolution of that challenge, which we will continue to stay vigilant on.
Operator
Your next question comes from the line of John Colantuni with Jefferies. Please go ahead. Your line is open.
John Colantuni
OK, great. Thanks for taking my questions. 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, which is still at nascent stages. And secondly, Jen, you mentioned pricing has been a driver of revenue growth. I was wondering if you could put a finer point on how much pricing contributed to revenue.
And as you think about what drove pricing, I'd be curious to get your perspective on whether pricing'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. Thanks.
Steve Hoffman
Sure, OK. So the first one was about Answers and Search. You know, those are surfaces where we don't have monetization on yet, but obviously represent an enormous market—an opportunity for us. The behavior of searching, both navigational and agentic, right now seems incremental and additive to existing engagement. And so that's great because that gives us another touchpoint—and a very specific one—that often has a shopping-related, lower-funnel, high-intent, conversion-oriented mindset.
So it's something we're really excited about, and I think that opportunity helps us—but it’s incremental to our current opportunity set.
Jen Wong
The next question was about pricing. So, we don’t break out impressions and pricing numerically, but it was a growth driver. What’s driving pricing is our strategy, right? Our strategy is to make every impression more valuable by delivering stronger marketing outcomes per impression to our advertisers—increasing click-through rates and response rates—so we drive more traffic to advertisers during the research and consideration phases.
More conversions, more app installs, more in-app events, right? And so that’s what’s driving pricing—the value of those outcomes. Now, obviously, when pricing increases, it’s a result of demand for those outcomes, and what really matters is the ROAS equation: return on ad spend.
So, if I’m acquiring a high LTV, high-quality user, is that customer incremental to what I already had? That’s why measurement becomes very important in supporting those gains. And that’s exactly why measurement has been a big focus for us—constantly demonstrating the unique value of Reddit. You’re getting incredible marketing outcomes with improving returns, thanks to all the work we’ve done on signals—and that’s actually what’s driving our strategy and the success of the marketplace.
Operator
Your next question comes from the line of Rich Greenfield with Light Shed Partners. Your line is open.
Rich Greenfield
Thanks for taking the question. I’ve got a couple. So first, on Reddit search—Steve, you know, when I click on the small magnifying glass, I see the new experience where it kind of dynamically expands across the screen and I’ve got the ‘Ask’ button as an option. But overall, search is still represented by that little magnifying glass in the upper right corner. I’m wondering, as you think about the starting point or how you approach using homepage real estate—specifically in the app—to make it more prominent, especially if you’ve improved the search experience, which seems like such a key part of growth.
Usage-wise, how do you plan to make it more visually focal from a consumer perspective on the homepage over the course of 2026? And then, just to follow up on your earlier comments regarding Google and OpenAI—in terms of the renewal or how you’re framing them more as a partnership going forward—the way these companies cite content, not just yours but everyone’s on the internet, is they paraphrase the content and then display a little circle with a number, allowing users to click through to get more information from the original sources.
If you could wave a magic wand, what would you want that experience to look like so you have a clear way to drive people more deeply into Reddit’s conversational content?
Steve Hoffman
OK, Rich, thanks. On the search bar—you’re in one of the variants. There’s another variant; the one I happen to be in has a big, fat search bar at the top, so you can go on the natural journey, or if you’d like to follow up afterward, I can put you in the big search bar version. Very much so. Anyway, we’re testing lots of things there. I personally prefer the bigger one. Regarding Google and OpenAI—and how we feel about citations—
Look, I think there’s a lot of movement happening there. If I could wave a magic wand, what I’d really want is this: say I go to some other platform and ask, ‘What’s the best speaker?’ Reddit helps you get a few options for the best speaker. I’d like that user to become aware: ‘Hey, you can go to the r/audio community and talk to other speaker geeks.’
I think that’s exactly the kind of thing that truly differentiates Reddit and would enhance that user’s experience. But there’s so much movement happening with both of these products. On the other hand, part of me also feels empathy for product teams who are moving really, really fast. So we’re in close contact with them. Our relationships are healthy. Obviously, there’s a lot of activity there, and I expect that will continue.
But, you know, I think we’ll continue to evolve together through this. Thanks.
Operator
Your next question comes from the line of Vasily Karasov with Cannonball Research. Your line is open.
Vasily Karasov
Hi, good afternoon. I wanted to follow up on what you said earlier about the new advertising solutions across the funnel that you're launching. So it seems like brand and performance growth rates converged in 2025, and yet in 2024, performance was outgrowing brand by a lot—two to three times, right? So given all the solutions you're launching, like DPA, lags, and so on, should we expect performance to outgrow brand again, especially since brand also faces tougher comps? Or are there any solutions on the brand side that could change that? Thank you very much.
Jen Wong
Yeah, thanks for asking. We are a full-funnel solution. So, you know, Reddit delivers value for marketers from the top to the bottom of the funnel, and brand is absolutely a part 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 Reddit-unique experiences. I mentioned the interactive ads that we started testing in Q4. I think there’s a nice roadmap there for high-impact, engaging ad units that are unique to Reddit. The second is that last year we invested in video—specifically deeper video views and video view optimization—and I think we’re going to go even deeper on that.
For video-forward advertisers, they can run campaigns on Reddit for potentially even longer durations. Video length is something we’re interested in. And then there’s raw optimization and automation—we want auto-bidding to be broadly adopted. We’re going to work on things like auto-targeting and bring some of those lower-funnel optimizations up to enhance the brand experience.
And finally, measurement is another area that’s really important to us. We’re going to be highly focused on our M&M measurement partners and demonstrating Reddit’s brand value. So yes, we’ll be actively working on brand. Again, we’re a full-funnel solution, and we care about delivering value across every part of it.
Operator
Your next question comes from the line of Mark Mahaney with Evercore. Your line is open. Mark, your line is open. Your next question comes from the line of Jason Helfstein with Oppenheimer. Your line is open.
Jason Helfstein
Thanks for taking the question. Jen, could you elaborate a bit more—maybe help us understand the progress regarding hiring, training, sales, and support to catch up with what seems like more advertiser demand than you can currently handle? So, roughly how long does it take to catch up, where are you in that journey, and any additional color you’d like to share? Thanks.
Jen Wong
Sure. Yeah, I mean, look—we have a process where we continually invest in our sales force, and we also continually work on improving their productivity through tools and technology. And when we see an opportunity—where the ROI is so high—we’ll invest behind new verticals, new geographies, and expanding channels. So frankly, this is something we do all the time.
I think maybe the underlying question is whether we could move faster if we added more resources or something like that. Again, there’s a process involved in bringing these products to market and enabling customer digestion and adoption—that’s just the reality. And as you can see, we have so much going on across our roadmap throughout the funnel in terms of new products, services, and adoption.
I think the team is doing a great job shouldering something like Cappy—which doesn’t drive revenue today—while also servicing marketers’ needs on the marketing platform. So we’re really thoughtful about that digestion curve. And with six consecutive quarters of 60% growth, we’re fueling this business as much as we can—and we’re always looking for opportunities to do even more.
Drew Valero
And just to add to that—no, I think that’s exactly right. There’s a really strong partnership here. You mentioned whether we’re chasing demand—I mean, sometimes we are—but it really comes down to the enablers. We truly need to work cross-functionally. Jim and I are reviewing this topic multiple times a month. And whenever we see an opportunity, it really makes sense for us to go ahead and make those investments, especially given the margin profile we have here.
It’s really easy to make these investments—we’re getting three to six times our return within just one calendar year. I love the fact that the returns are immediate and easy to track: you can see exactly which account was added or the sales lift in a specific geography or vertical. So anyway, we’re really pleased with how it’s going. It really hinges on the enablers—and sometimes those enablers are within our control, while other times we’re waiting on customers for certain pieces.
Operator
Your next question comes from the line of Josh Beck with Raymond James. Your line is open.
Josh Beck
Thank you for taking the question. I wanted to ask a little bit about the large advertiser category, specifically where you stand in terms of wallet share and how much headroom you think remains with some of these large advertisers. Obviously, you’re seeing great momentum bringing on a bunch of new advertisers. I’m particularly interested in that segment.
And then, regarding the outlook for Q1, I recall that last quarter you expressed a somewhat conservative view due to certain tariff dynamics. Is there anything you’d highlight now that we should be mindful of concerning the broader environment relative to Q1? Thank you.
Jen Wong
Sure, I can take the first one on large customers. From a share perspective, I believe there’s an opportunity to deepen our relationships with these partners. When I look at it, many often start with us in the U.S. market but can evolve into global partners, while others are still mid-journey in that expansion.
Another point is that some of these large customers manage a portfolio of around 100 different brands, and we still haven’t penetrated all of them—we’ve only covered a minority percentage so far. So there’s significant room to expand across their various lines of business.
Lastly, with large customers, we’ve typically started at the top of the funnel in many cases, and the opportunity lies in moving further down the funnel. Increasingly, lower-funnel activity is being driven not just by the scaled segment but more and more by the large customer segment as well. However, this remains an area of opportunity for us.
Part of the reason is that implementing Cappy and the necessary infrastructure for lower-funnel activities simply takes longer with larger advertisers. We’re making good progress, but there’s still headroom. These advertisers are massive, and given Reddit’s footprint—which continues to grow 20% year-over-year—we’re really just scratching the surface in terms of our opportunity.
Drew Valero
Josh, hey, regarding the guidance, let me give you a couple of key pieces of information. Let me specifically address your question: what’s different? Is there anything different in the first quarter? Look, I think the guidance we provided for this quarter—up 52% to 54%—is very similar to the last couple of quarters, where we were in the low- to mid-50% range in Q3 and Q4. So, the guidance profile is very consistent.
I’d say if you drill down into the quarter itself, we were quite strong from start to finish in Q4. We had a good October, a good November, and a good December—it was simply a strong quarter for us. So, we ended the year with solid business momentum. That said, on the margin side, from a forecasting perspective, we still have work to do as we enter the quarter.
We still have about 40% to 50% of our orders to book during the quarter. Specifically addressing your question about the first quarter, your business typically ramps up a bit later—March tends to be your biggest month. So, you really need to make March happen, and for us, in many cases, that can occur within the quarter itself. That’s really the only marginal dynamic at play.
But overall, the guidance is very similar to the last couple of quarters, and there was clear momentum as we exited Q4 heading into the holiday season. Does that make sense?
Operator
Your next question comes from the line of Naveed Khan with B. Riley Securities. Your line is open.
Naveed Khan
Thank you very much. I have a two-part question, if I may. First, regarding user marketing, I’m curious how you’re evaluating the ROI on your user marketing spend and what your thoughts are on scaling this further as we move into 2026. My second question is on M&A: Drew, you mentioned it could include scaled acquisitions or scaled capabilities—I’m just wondering what kinds of things these might entail. Any additional color on that would be helpful. Thank you.
Drew Valero
Sure. Let me address that on the ROI side—I mean, it’s pretty consistent with how others are modeling it. We’re looking at the costs for specific advertising, then we’re looking at the users we’re acquiring, and then we’re applying a retention curve that’s quite similar to how I think other companies approach it. I believe the longevity of our model tends to be a bit more favorable than most, due to the high gross margins that a user can generate here at Reddit.
But overall, you know, it’s a fairly linear model—really valuing, on an income statement basis, the value it creates, with a pretty straightforward ROI payback over a relatively short period of time. So it’s not drastically different from most other models you might see in the business. I do think we have a slight advantage because of our high gross margins, which gives us a somewhat better ability to achieve payback on the revenue we generate per user.
OK. On the second point, regarding M&A: what I’m trying to say is that we continue to evaluate many opportunities. I probably wouldn’t overthink the scaled opportunities—I’d just view them as part of a spectrum of possibilities. We’re looking at capabilities, companies, and technologies. I think we’ve been successful here at integrating a number of technologies.
This actually ties back to Jason’s question a couple of minutes ago. It’s really been one of the secrets behind our success on the revenue side. The ad tech team has done an outstanding job in how they’ve been able to drive our business forward. One key way is by acquiring technologies rather than building them in-house—this saves us six months to market, even up to 12 months, and gives us a proven solution.
So we’ve been able to successfully integrate various technologies, particularly on the ad tech side. That’s significantly helped us on our monetization journey. I’d say that’s really been our primary focus up to this point. But we’re not ruling anything out—that’s why I mentioned scale and setup.
Operator
Your next question comes from the line of Andrew Boone with Citizens. Your line is open.
Andrew Boone
Thanks so much for taking the question. Jen, I wanted to ask about your shopping ads. What do you need to do—either from a tools or ad format perspective—to accelerate growth in that vertical? And then, Steve, going back to Seekers and some of the generative AI tools now available, could you elaborate on your vision or the kind of experience you’re trying to build for people coming to Reddit to look for XYZ? Thanks so much.
Jen Wong
Sure. I can take I think personal on DPA. So I think that we have been our, 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 you know companies, I think we want to do more work on ML in terms of the signals that I think can improve our row as to be even more competitive.
I mean, shopping is a pretty numerical return exercise, but we are quite competitive today with, you know, very quickly, you know, the only place in April with a number of peers and that's allowed us to grow shopping. The second piece is just raw work on adoption. So with shopping, you have to get product feeds in. You want Cappy, you know, 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 at. The team is doing a really good job working through, but they're, you know, just working through the customer list. You saw our strong growth in retail that's fueled by the success we've been seeing in DPA. 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, you know, that of DPA possibility,
Steve Hoffman
OK. And for search, you know, we spent most of last year talking about how do we unify these two search experiences, the traditional search on Reddit and then the Gen. AI search. I think the main thing that we've learned is that the Gen. AI search results I think will just be better for most queries. There's a type of query there I think particularly good at, 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? And Reddit is really great at this. When we thought about traditional search, it's more like navigation, right? Take me to this topic, to the subreddit. 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, right?
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. And 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 with the LLM answers mostly in text now, we'll start making those responses more media rich as well.
So one of the primary use cases, I think there's three use cases that people come to Reddit for. One of the primary ones is 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.
Operator
We have time for one more question, and that question comes from the line of Colin Sebastian with Baird. Please go ahead.
Colin Sebastian
Thanks. Good afternoon. Appreciate the questions. You know, 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 Reddit as more of a niche content platform rather than an essential full-funnel opportunity? Is there anything your marketing or outreach efforts could do to help the market catch up? Thank you.
Steve Hoffman
Thanks, Colin. Jen and I are going to tackle the first question together. So, it’s really interesting when I talk to customers—brands, specifically. Over the years, we’ve seen a steady progression: first, 'What is Reddit?' Then, 'OK, what is community? OK, I get it. How do I show up?' And now they’re saying, 'I have to be on Reddit, and I have to show up in the right way.'
And they want a way to do this not just as a paid advertiser but organically as well. They want to provide great customer service. They want to get their content onto the platform because they increasingly realize that the best way to perform well in external search results is to show up effectively on Reddit. So we’re actually starting to see a shift in their thinking.
Multiple brands have told me they’re reorganizing their social media teams into dedicated Reddit teams. So they’re really beginning to appreciate the unique aspects of Reddit and the opportunities it offers. And of course, we believe that if they can deliver great organic experiences—which is exactly what we’re trying to help them achieve through our Reddit Pro initiatives like verified profiles, official accounts, labeled accounts, and even some of the app and bot labeling I mentioned earlier—they’ll be able to show up as first-class citizens: clearly labeled and intentional.
And of course, we believe this will also open the gateway for deeper customer relationships.
Jen Wong
The only thing I’d add is that marketers truly understand why Reddit is so valuable for recommendations and LLMs—it’s because AI models don’t know anything unless it comes from humans, and Reddit has the best answers and recommendations. And I think their perspective is, 'Yes, we’d absolutely love that.'
But obviously, no one knows what will ultimately come out of an LLM until it does. The real opportunity for them today lies in the fact that all this human conversation is happening on Reddit—and that’s where they can engage this audience and shape the conversation through our marketing platform. That’s the best way to drive meaningful marketing outcomes with this highly influential audience right now. So yes, that’s definitely part of the conversations we’re having.
The second part is, I think you asked about Reddit, you know, appearing as a niche platform. You know, this is one of those myths that we always try to debunk 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 half a billion monthly active users and 120 million daily.
So it all adds up to a very large-scale audience. You know, it’s a constant educational effort to remind people of that. And because we can show up within those communities that can seem so, so niche, I think the other piece—and something we’ll be doing—is as we build on our community insights and tools, we’re going to bring that closer to our Ads Manager so there’s a seamless connection between the insights, the audience you see, the volumes you can actually reach and engage with on Reddit, and the opportunities within the marketing platform.
So we want to bring all of that together a bit more so that this volume and scale are more prominently reflected in the insights.
Steve Hoffman
Great, Krista. I think we’ll end the call there. Just want to thank everyone for joining and look forward to speaking again soon. Thanks, everyone. Bye, bye.
Operator
This concludes Reddit’s fourth quarter 2025 earnings call. You may now disconnect.
Details at Reddit IR
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