Backed by GOOGL, RDDT keeps rallying---

$Reddit(RDDT.US) posted Q4 results after-hours on Feb 5 ET, with a solid overall print. Despite the bar being raised into the release, the actual numbers still came in slightly ahead, reflecting a social platform benefiting from traffic tailwinds and executing smoothly on early monetization.

In addition, the company announced its first $1bn share repurchase program. No expiry was set, and for a company public for less than three years, the signal on shareholder returns is clear.

Key takeaways:

1) Deeper monetization: Q4 revenue was $730mn (+70% YoY), with a modest QoQ acceleration off a not-low base last year.Growth was led by ads, while data-licensing revenue is recognized ratably under contracts and thus stayed steady (key customers include Google, OpenAI and Perplexity for model training). Contracts with Google and OpenAI expire at year-end and are likely to renew.

Ad growth was underpinned by better ROI driving higher CPMs, alongside more effective inventory coming online. As a social platform still adding users, Reddit is an easier buy for advertisers. In Q4, ad revenue per user rose 59% in the US and 39% Intl, with QoQ acceleration, underscoring rapid progress in commercialization.

2) Ad guide above the Street: The company guides Q1 revenue to around $600mn, implying +53% YoY and a visible decel. Given its track record of beating, near-term growth remains compelling.

In Jan, Reddit rolled out Max Campaigns, an automated, AI-driven ad product comparable to Google's PMax and Meta's Advantage+, aiming to improve targeting and conversion.

3) User growth steady; Google remains key: Q4 platform DAU reached 120mn, with net adds of 5.4mn QoQ, similar to Q3, and over 80% of net adds coming from outside the US.Low US DAU growth has been a bear argument; Q4 remained single-digit but ticked up slightly off a low base.

Third-party data show App DAU notably slowed, while Web users held steady. Within Web traffic sources, Google Search is not only the primary driver but also trending higher by visit counts. Reddit's direct traffic fell sharply in Q2, then recovered in Q3 and Q4.

This suggests Reddit is still riding Google's referral tailwinds. With few other external sources adding incremental traffic, Google's flow becomes even more valuable. Some institutions compared DAU growth from filings with Google's referral growth and found the trends largely aligned.

3) Profit nearing mid-term target: Q4 GPM was stable. Within opex, S&M grew sharply, doubling YoY, reflecting ad team build-out, promotion of the new ad stack, and Reddit's own UA spend, especially Intl.

This pace and scale are unlikely to persist. The company’s mid-term Adj. EBITDA margin target is 50%, and it reached 45% in Q4. Based on Q1 guidance (37%–50%, with seasonality making Q1 softer), margins should keep moving toward 50%.

4) Key financials at a glance

Dolphin Research View

As Google's junior partner, Reddit has navigated the crowded social space well, unlike the tougher trajectories at Snap and Pinterest. With data-licensing renewals likely at year-end, its tight relationship with Google should continue. With a solid base, advertiser appetite for social, and Reddit still in early-to-mid monetization, earnings can stay in a high-growth phase.

On valuation, Reddit has corrected alongside software growth peers; as of Feb 4 close, market cap fell to $28.5bn. For FY26 estimates, we raise assumptions: revenue growth to 40% (from 35%) and Adj. EBITDA margin to 45% (from 42%), implying $1.38bn in profit. That puts the stock at ~21x EV/Adj. EBITDA; while medium/long-term uncertainty remains around Google referrals, the recent pullback looks overdone near term.

Detailed charts below

Risk disclosure and statement for this article:Dolphin Research disclaimer and general disclosures