RDDT Reddit Inc. 10-Q 2026-09-30 section summaries

Reddit, Inc. — Q3 and nine months ended September 30, 2026

Consolidated results

Revenue increased 53.0% in Q3 and 60.0% in 9M. Operating margin rose to about 29.2% in Q3 from 23.7%; net income grew 74.1% in the quarter and 166.1% year to date.

Revenue mix

Advertising is the dominant revenue source, and the U.S. accounts for most revenue; no individual non-U.S. country represented 10% or more.

Segment results

Reddit reports one operating and reportable segment.

For additional segment reporting, adjusted gross profit was $819.546M in Q3 2026 versus $532.614M, and $2,161.685M for 9M versus $1,342.034M. Adjusted operating expenses were $417.281M versus $296.607M in Q3 and $1,150.640M versus $824.007M for 9M. Segment reconciliation items included stock-based compensation and related taxes of $136.419M in Q3 and $322.103M for 9M; depreciation and amortization of $4.260M and $12.728M; and net interest income of $26.814M and $75.726M, respectively.

Cash generation and capital returns

Nine-month cash increased by $404.014M; investing cash flow was a $164.294M net use, primarily for net purchases of marketable securities. The board authorized a $1.0B share-repurchase program in February 2026. Reddit repurchased 2,193,461 shares for $339.959M in 9M, with $660.0M remaining under authorization; there were no comparable-period repurchases.

Balance sheet and liquidity

Tangible equity, calculated as equity less goodwill and other intangible assets, was $3.529448B. The detailed acquired-intangible disclosure reported $10.061M net, comprising developed technology of $8.061M and other intangible assets of $2.0M; developed technology had a 0.8-year weighted-average remaining useful life. The balance sheet shows no borrowing debt.

Recurring fair-value financial assets totaled $2.877770B, versus $2.386449B at year-end. September 30 amortized cost was $2.890444B, with $28K gross unrealized gains and $12.702M gross unrealized losses. Marketable-security amortized cost included $944.6M maturing within one year and $743.7M within one to five years. There were no credit-loss impairment charges in the periods reported.

Shares, commitments and risks

Class A and Class B shares outstanding increased from 190,892,108 at December 31, 2025 to 193,116,334 at September 30, 2026 (192,321,417 at June 30). Q3 diluted weighted-average shares were 201,860,245 versus 202,727,809; 9M diluted weighted-average shares were 202,186,014 versus 201,659,094, including a 10,030,529-share dilutive effect from potential common stock. At quarter-end, 67,478,498 shares were reserved for issuance. Outstanding options had $967.985M aggregate intrinsic value; unrecognized compensation expense was $62.3M for options and $285.1M for outstanding RSUs/RSAs.

Cloud commitments totaled $1.46B: $880.0M to AWS for July 2026–June 2029 and $580.0M to Google for September 2026–August 2029. The $500.0M revolving facility had $494.3M available after $5.7M of letters of credit; Reddit reported no borrowings and compliance with its maximum-leverage covenant. The facility is secured by substantially all assets, including intellectual property.

Remaining performance obligations on contracts longer than one year were $62.4M, primarily long-term content licensing: $31.9M was expected to be recognized in the remainder of 2026 and $30.5M in 2027. Reddit is appealing a UK ICO penalty notice that includes a £14.5M fine. A securities class action was dismissed with leave to amend; a second amended complaint was filed in October 2026, and related derivative suits remain unresolved. The company maintains a full valuation allowance against U.S. federal and state deferred tax assets, but says recent U.S. profitability could support releasing a significant portion within 12 months; timing and amount remain uncertain. Advance held approximately 22% of outstanding Class A and Class B shares.

Reddit — Q3 and nine months ended September 30, 2026

Consolidated results

Revenue grew 53% in Q3 and 60% in 9M. Advertising drove most of the increase: advertising revenue rose $297.7M (54%) in Q3 and $860.5M (63%) in 9M. Ad pricing increased approximately 34% in Q3 and 35% in 9M, reflecting stronger performance across advertising objectives and advertiser demand. Ad impressions rose approximately 15% in Q3 and 21% in 9M, supported by ad-load optimization and new placements; more users also contributed to 9M growth.

Geographically, U.S. revenue increased $239.3M (50%) in Q3 and $680.3M (57%) in 9M; rest-of-world revenue increased $70.7M (67%) and $206.0M (75%), respectively. Operating margin expanded to 31% from 23% in Q3 and 28% from 14% in 9M; net margin rose to 32% from 27% and 31% from 18%, respectively. Cost of revenue rose with hosting usage for product enhancements and, to a lesser extent, user growth and activity, partly offset by lower hosting prices and efficiencies. R&D spending grew mainly with employee-related and internal hosting costs. Higher sales and marketing reflected user and brand marketing and headcount; G&A growth reflected professional services and employee costs. Other income primarily benefited from increased interest earned on a larger invested balance.

Cash flow and capital allocation

Adjusted EBITDA includes a substantial stock-compensation add-back: stock-based compensation expense and related taxes were $136.419M in Q3 and $322.103M in 9M. Separately, 9M noncash stock-based compensation in the cash-flow reconciliation was $300.6M, versus $258.0M in 2025. Working capital included a $139.3M increase in accounts receivable, partly offset by a $59.6M increase in accounts payable, accrued expenses and other current liabilities.

Investing cash outflow was $164.294M in 9M, largely reflecting $1.3B of marketable-security purchases offset by $1.1B of maturities and sale proceeds. Financing cash outflow was $369.618M, including $340.0M of share repurchases and $45.0M of taxes on RSU net settlement. Reddit repurchased 2,193,461 Class A shares for $340.0M under its $1.0B authorization, leaving $660.0M. Cash, cash equivalents and restricted cash increased $404.014M in 9M, compared with $349.511M in 2025. Low capex reflects the company’s reliance on third-party infrastructure.

Users and monetization

Global DAUq was 130.3M, up 12% year over year, while global WAUq grew 16%; DAUq/WAUq was 25%. Logged-in DAUq grew 7% year over year. Growth varied geographically: DAUq rose 24% in the rest of the world but declined 2% in the U.S. Sequentially, global DAUq was flat as 3% rest-of-world growth was offset by a 5% U.S. decline. Management attributed growth to marketing investment and, to a lesser extent, product improvements and other initiatives, partly offset by third-party search-engine changes. Search changes have increased referral-traffic volatility, including amid AI-generated search summaries. Reddit reversed its prior plan to stop reporting logged-in and logged-out DAUq, saying the measures remain useful for evaluating user trends.

The U.S. is more mature and monetized than international markets, and newer users generally monetize at lower rates. Advertising is seasonal, with Q4 typically strongest, particularly in the U.S.; content licensing also contributes revenue, while direct-to-user products were not material.

Liquidity, commitments and tax considerations

At September 30, 2026, cash, cash equivalents and marketable securities totaled $3.0B, approximately 3% held outside the U.S. The $500.0M five-year revolving credit facility had $494.3M available after $5.7M of letters of credit; no borrowings were reported. The facility is secured by substantially all assets, including intellectual property, and has a maximum-leverage covenant and other restrictions; Reddit reported compliance. Management expects liquidity and operating cash flows to cover working capital and capex for at least 12 months and the foreseeable future.

Cloud-provider commitments include $880.0M to AWS for July 2026–June 2029 and $580.0M to Google for September 2026–August 2029. Infrastructure costs and continued investment in users, advertising and product enhancements remain important cost and execution considerations. The company reported no off-balance-sheet financing arrangements.

Reddit maintains a full valuation allowance against U.S. federal and state deferred tax assets. Recent U.S. profitability could support releasing a significant portion within the next 12 months, potentially producing a significant tax benefit. The timing and amount depend on forecast profitability, tax-deductible stock compensation (which is affected by share price) and macroeconomic conditions.

Market risk

Cash and investment balances

The balances increased by $0.4 billion (40%) and about $0.2 billion (13%), respectively. Reddit holds these investments for capital preservation and liquidity, not for trading or speculation. The portfolio consists of short-term cash equivalents and marketable securities, including U.S. government, investment-grade corporate and government agency securities, time deposits, and commercial paper. Because the portfolio has relatively short duration, a hypothetical 100-basis-point interest-rate change would not materially affect fair value or the consolidated financial statements.

Foreign-currency exposure

For the three and nine months ended September 30, 2026 and 2025, most revenue and operating expenses were denominated in U.S. dollars, and international operations were not material. Foreign-exchange effects on results and cash flows were minimal; a hypothetical 10% change in the U.S. dollar against other currencies would not have a material effect on the financial statements. Reddit had no foreign-currency hedging contracts during these periods, though it may use them in the future. It expects foreign-currency exposure to become more significant as its international operations grow.

Controls and procedures

As of September 30, 2026, the CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable-assurance level. No changes to internal control over financial reporting during the quarter materially affected, or were reasonably likely to materially affect, those controls.

Management cautioned that controls cannot provide absolute assurance: errors or fraud may go undetected, and controls may become inadequate as conditions or compliance requirements change. This section reports no financial metrics or other material business developments.

Business model, users and advertising

Reddit’s growth and monetization depend on user engagement, retention and contributions, particularly daily active uniques (DAUq). DAUq counts a uniquely identifiable user visiting the site or app in a 24-hour period; Reddit cautions that the metric may not correlate with revenue and may be affected by estimation, bots, multiple accounts and other measurement limitations. Management expects DAUq growth to slow as the user base expands, and international growth initiatives such as machine translation may contribute less as major languages are covered. Growth in lower-monetization markets may not translate proportionately into revenue or average revenue per user.

Advertising accounted for approximately 94% of FY2025 revenue, up from 91% in FY2024; the ten largest advertisers contributed approximately 21% of FY2025 revenue, down from 25% in FY2024. Advertisers generally make no long-term spending commitments, leaving Reddit exposed to budget changes, competition, measurement limitations, ad blocking and the loss of major customers. Limited advertising inventory or an inability to demonstrate campaign effectiveness—particularly as privacy changes restrict targeting and attribution—could reduce demand, pricing and spending.

Search-engine referrals declined during the current quarter, adversely affecting DAUq growth. Changes to search rankings and the growing prominence of AI-generated answers could further divert users, while AI tools or agents could use Reddit content without bringing users to the platform. Reddit plans to test logged-in access restrictions in one or more international markets in the quarter ending December 31, 2026, and intends to use the results to guide broader restrictions, including in the U.S. Such measures could reduce users and advertising reach.

Platform value also depends on a relatively small number of prolific contributors and volunteer moderators. Contributor departures, weaker content, moderation gaps, harmful material or disputes over enforcement could reduce engagement, advertiser appeal and user trust. Reddit’s layered moderation model can produce inconsistent or controversial decisions; growing content volumes and formats such as video add to enforcement challenges. In June 2023, some moderators restricted community operations in response to API changes; Reddit says the actions did not then materially affect business or operating results, but similar events could be harmful.

Technology, content and execution

Unauthorized scraping and commercial reuse of Reddit content may undermine licensing opportunities, user privacy and deletion safeguards, and enable competing products or AI models. Reddit may be unable to identify downstream recipients or ensure content is removed from third-party datasets. Its content-licensing market is new and uncertain: substantially all contract value associated with licensing revenue comes from two partners, whose agreements are approaching the end of their respective terms. Renewals, replacement partners and enforcement against unlicensed use are uncertain; litigation may be costly and unsuccessful.

New products and monetization initiatives—including AI search, generative-AI features, interactive advertising, virtual goods and creator programs—may require significant investment, fail to attract users or advertisers, disrupt existing behavior, or create legal and regulatory exposure. AI summaries, translations and other outputs may be inaccurate or harmful, and rights to training data may be disputed. International expansion also requires local content and advertising capabilities, with uncertain demand, cultural fit and currency exposure.

Reddit depends on Amazon Web Services and Google Cloud Platform for infrastructure. An AWS outage on October 20, 2025 significantly interrupted service. Further outages, capacity constraints, provider price or terms changes, or difficulties switching providers could disrupt service, increase costs and drive users away. Reddit expects infrastructure spending to grow with traffic and does not carry business-interruption insurance sufficient to cover potentially significant losses. Cybersecurity risks include a February 2023 incident involving an employee’s stolen credentials and a September 2026 compromise of HBO Max’s verified Reddit account that led to malicious ads for about 48 hours. Attacks, vendor failures, bots and advertising fraud could expose information, disrupt services, distort metrics, trigger advertiser credits, or cause litigation, fines and reputational damage.

Reddit reported a $484.3 million net loss in FY2024, despite returning to quarterly profitability beginning in Q3 2024. Profitability may not continue: investment in product development, user growth, marketing, infrastructure and hiring could outpace revenue. Results also face seasonality—advertising typically strengthens in Q4 and weakens in Q1—along with macroeconomic, regulatory, currency and litigation risks. Full-time headcount rose to 2,555 at December 31, 2025, from 2,233 a year earlier (about 14.4%), increasing management and organizational demands. Recruiting and retaining talent, dependence on key personnel including CEO Steven Huffman, and equity compensation-related dilution are additional risks.

Regulation, financing and shareholder risks

Reddit faces evolving rules on privacy, online safety, content, advertising, AI, minors, competition and intellectual property across multiple jurisdictions. The European Commission designated Reddit a Very Large Online Platform in August 2026, following its exceeding the relevant threshold in February; additional obligations are due by January 2027. Age-verification requirements, content restrictions and privacy laws could raise costs, deter users or limit service availability. GDPR penalties can reach the greater of 4% of global annual turnover or €20 million; UK GDPR penalties can reach £17.5 million. Reddit is appealing a UK Information Commissioner’s Office penalty notice and says the Dutch data protection authority has inquired into its licensing practices. Litigation, investigations, Section 230 challenges, export controls and changing tax rules may also lead to costs, fines or product changes. At December 31, 2025, Reddit had approximately $1.7 billion of U.S. federal NOL carryforwards and $806.1 million of state NOL carryforwards, whose use may be limited by tax rules or ownership changes.

In July 2025, Reddit amended its revolving credit facility from $750.0 million to $500.0 million, available through July 1, 2030. It is secured by liens on substantially all assets, including intellectual property, and contains a maximum leverage ratio and other restrictive covenants. Covenant restrictions, default or difficulty obtaining future financing could constrain investment and strategic flexibility.

The Board authorized repurchases of up to $1.0 billion of Class A shares in February 2026, but the program has no expiration date and creates no obligation to repurchase; it may reduce cash available for other needs. As of September 30, 2026, Reddit had 146,964,730 Class A and 46,151,604 Class B shares outstanding. Potential dilution included 9,611,808 options and 3,564,764 RSUs and PRSUs (3,228,331 Class A and 336,433 Class B shares). Class B shares carry ten votes each, compared with one vote per Class A share. Under a voting agreement, Steven Huffman was estimated to control approximately 75% of voting power; Advance also has board-designation and consent rights that can constrain corporate actions. These arrangements, alongside takeover protections, may limit public shareholders’ influence or ability to receive a premium in a sale. Reddit has never paid cash dividends and does not expect to do so in the foreseeable future. Its shares may also be unusually volatile, including from retail-investor trading unrelated to fundamentals.

For the three months ended September 30, 2026, no directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements. This section disclosed no financial or business developments.