Reddit: Hype Train or Long-Term Play?

Digging into the fundamentals behind the frenzy

At the start of May, Reddit made waves with a blowout earnings report: 61% revenue growth, 31% increase in active users, and an EPS of $0.13, crushing the $0.01 expected. For once, a freshly IPO’d tech company is outperforming, and by a wide margin.

But with a PS near 10x and its close ties to meme stock culture via WallStreetBets, the question remains: is Reddit a serious long-term play or just another hype-fueled ride? Let’s dig in.

What is Reddit?

Reddit is a social media platform and online forum known for its vast network of user-driven communities, called “subreddits”, where people gather to discuss virtually every topic imaginable, from investing and gaming to niche hobbies and current events. Founded in 2005, Reddit distinguishes itself with a unique structure that emphasizes anonymity, community moderation, and upvote/downvote mechanisms that surface the most relevant content. Reddit functions more like a decentralized collection of interest-based microforums than a traditional social network, fostering deep engagement and highly active communities.

What sets Reddit apart is its influence on internet culture and public discourse. Its communities have sparked viral trends, broken news stories, and even impacted financial markets (most famously through WallStreetBets and the GameStop short squeeze).

80% of Reddit’s revenue comes from the US, with the remaining 20% generated internationally. In terms of users, 45% comes from the US even if the fastest growing communities are from outside the US.

A fast growing platform

With over 100 million daily active users and 400 million weekly active users, Reddit is demonstrating strong momentum, posting an impressive 30% YoY growth.

One key metric to watch is ARPU (Average Revenue Per User). In the US, ARPU currently stands at $6.27. It is about 30% lower than peers like Pinterest and Snapchat, and over 90% below Meta, the industry leader in monetization. This gap highlights a significant opportunity for revenue expansion.

For investors, Reddit's growth story is multi-dimensional:

• User growth, particularly in international markets, a core focus of the company’s strategy

• ARPU expansion, which grew 23% YoY in Q1 FY25

• Margin improvement, as operating expenses scale more slowly than revenue

To support these goals, Reddit continues to invest aggressively in its technology stack, rolling out new features such as machine translation, enhanced search capabilities, and improved content discovery tools, all aimed at boosting user engagement and monetization.

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