Image source: The Motley Fool.

DATE

Thursday, July 30, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Head of Investor Relations - Jesse Rose
• Co-Founder and Chief Executive Officer - Steven Huffman
• Chief Operating Officer - Jennifer Wong
• Chief Financial Officer - Andrew Vollero

TAKEAWAYS

• Revenue -- $805 million, growing 61% year over year and marking the eighth consecutive quarter of over 60% growth.
• Advertising Revenue -- $762 million, up 64% year over year, driven by increases in both pricing and impressions.
• Other Revenue -- $43 million, increasing 24% year over year.
• U.S. Revenue -- $638 million, representing 56% growth compared to the prior year.
• International Revenue -- $167 million, increasing 84% year over year.
• Adjusted EBITDA -- $343 million, reflecting a 43% margin and growing 106% year over year.
• Net Income -- $253 million, or $1.25 per diluted share, up from $89 million in the prior year.
• Daily Active Uniques (DAUq) -- 130.3 million, increasing 18% year over year.
• Weekly Active Uniques (WAUq) -- 514.6 million, growing 24% and crossing the 500 million milestone.
• Global ARPU -- $6.18, representing a 36% increase year over year.
• U.S. ARPU -- $11.85, reflecting 51% growth compared to the prior year.
• International ARPU -- $2.26, increasing 31% year over year.
• Gross Margin -- 91.3%, an increase of 50 basis points from the prior year, benefiting from hosting efficiency despite higher AI inference costs.
• Operating Cash Flow -- $262 million for the quarter, bringing the trailing 12-month total to over $1 billion for the first time.
• Share Repurchases -- $235 million deployed to repurchase 1.5 million shares at an average price of $157.57.
• Q3 2026 Revenue Guidance -- $860 million to $870 million, representing 47% to 49% growth at the midpoint.
• Q3 2026 Adjusted EBITDA Guidance -- $385 million to $395 million, reflecting a 45% margin at the midpoint.
• Active Advertisers -- Grew over 70% year over year, supported by broader adoption of automated tools.
• Reddit Max Performance -- Revenue from the automated suite grew over 150% sequentially from the first quarter.
• Lower-Funnel Revenue -- Revenue from dynamic product ads and app installs each more than doubled year over year.
• Scale Channel Revenue -- Doubled year over year, reflecting strength in the mid-market and SMB segments.
• Product Metrics -- Management reported that 1 billion posts and comments were added since the first quarter, bringing the total corpus to 26 billion.
• Efficiency Metric -- Reached $1 million in revenue per employee on a trailing 12-month basis.
• Search Referral Volatility -- Management noted choppy search traffic later in the quarter, which offset some product-driven daily active user growth.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

• Huffman stated, "visibility into referral traffic remains low," noting that traffic from search was volatile toward the end of the second quarter.
• Vollero stated, "user acquisition spending needs stronger attention to improve returns," as the company evaluates the mix between brand and paid marketing.
• Huffman noted, "AI overviews has yet to make a similar level of positive impact" as traditional search links, indicating uncertainty regarding traffic from generative AI features on search engines.

SUMMARY

Management reported that second-quarter financial performance was driven by the continued expansion of the advertising business and improved monetization efficiency across all geographic segments. Total revenue growth remained above 60% for the eighth consecutive quarter, while profitability metrics like net income and operating cash flow more than doubled compared to the prior year. The company is focused on converting its base of over 500 million weekly users into daily active users through product updates, including AI-driven feed improvements and the expansion of video content. Additionally, the company initiated its first significant capital return program through share repurchases while achieving a efficiency milestone of $1 million in revenue per employee.

• CEO Huffman stated that "new app user retention... was up 50% year-over-year on a relative basis this quarter," identifying this as a primary driver for moving weekly users to daily active status.
• COO Wong reported that conversion volume grew over 100% and click volume grew over 30% year over year, indicating that technical optimizations are delivering better returns for advertisers.
• Management announced it will discontinue reporting the breakdown of logged-in and logged-out daily active user metrics starting in the third quarter of 2026.
• CEO Huffman attributed the success of the creator ecosystem to the fact that "Reddit is for everybody else," noting that posts and comments per logged-in user increased both in the U.S. and internationally.
• The company reported that its Shopify integration, which became generally available in May, has already reached over 500 active accounts with high activation rates.
• CFO Vollero indicated that the full-year guidance for stock-based compensation was lowered to the low-to-mid-teens as a percentage of revenue due to better-than-expected leverage.
• CEO Huffman noted that the company is exploring new video formats, including "spoken Reddit," to allow users to listen to posts in a way similar to podcasts.

INDUSTRY GLOSSARY

• DAUq: Daily Active Uniques, a measure of users who visit Reddit at least once in a 24-hour period.
• WAUq: Weekly Active Uniques, a measure of users who visit Reddit at least once in a trailing seven-day period.
• Reddit Max: The company's automated advertising platform that uses AI to optimize campaign performance for mid and lower-funnel objectives.
• ARPU: Average Revenue Per Unique, calculated by dividing quarterly revenue by the average number of daily active uniques.
• CAPI: Conversions API, a tool that allows advertisers to send web events from their servers directly to Reddit to improve ad tracking and optimization.

Full Conference Call Transcript

Operator: Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to Reddit's Q2 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Jesse Rose, head of investor relations. You may begin your conference.

Jesse Rose: Thanks, Julianne. Hi, everyone. Welcome to Reddit's second-quarter 2026 earnings call. Joining me are Steven Huffman, Reddit's Co-Founder and CEO; Jennifer Wong, Reddit's COO; and Andrew Vollero, Reddit's CFO. I would 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. 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 second quarter letter to shareholders and earnings press release are available on our Investor Relations website and Investor Relations subreddit. And now I will turn the call over to Steven.

Steven Ladd Huffman: Thanks, Jesse. Hi, everyone. Thank you for joining us, and welcome to our earnings call. Q2 reinforced something we believe deeply. As the Internet becomes more automated, the value of authentic human conversation continues to rise. We saw that reflected in both our commercial success and early progress of our product roadmap. We delivered our eighth consecutive quarter of over 60% revenue growth, hit an adjusted EBITDA margin of 43%, and crossed a major milestone we have been chasing: $1 million revenue per employee. These results speak to the strength of Reddit's monetization engine and the differentiated value we provide advertisers. I heard that clearly at Cannes last month. We met with many of our customers.

Across the board, brands told me they believe in Reddit's distinct ability to connect them with highly engaged, highly intentional audiences. More than that, they are rooting for us to win. Reddit works differently from other platforms. And that is important to advertisers and people alike. As the Internet becomes flooded with synthetic content, people are craving real human perspective. We are the antidote to an automated web. AI compresses the Internet into summaries. Reddit delivers the opposite. Deep discussions, passionate debates, and lived experiences. People do not want a summary of Reddit. They want Reddit. As AI makes information more abundant, the challenge is no longer finding content. It is finding context, personal opinion, and firsthand accounts.

Everything online feels flat, polished, generated, or sponsored. So consumers are overwhelmed and increasingly skeptical. We have never had more information, and we have never trusted it less. That is why decision-making is shifting from single authorities to groups of real people who have nothing to gain from you purchasing a product. And it is not just purchase decisions. it is health, careers, travel, everything. Our top priority remains growing our daily active user base by improving the experience for new users so they come back more frequently. Everyone belongs on Reddit because everyone has content because Reddit has content for everyone. We already have a massive base of weekly users. And our focus is on converting them into dailies.

Our product work is improving engagement in key areas. Updated feed models are increasing contribution rates and session frequency. And we are successfully driving more web users to our app where they are far more engaged. We have made it easier to post on Reddit and to find the right community to post in. We have also broadened the product in ways that support growth and engagement. Video and comments help expand our upper-funnel, and interactive games on our developer platform drive repeat usage and daily habit. On a weekly basis, Reddit now reaches over 500 million people, including more than 130 million daily.

In Q2, we improved our user mix and brought more high-quality users to Reddit across the app and site. And new app user retention, an area we have discussed frequently, was up 50% year-over-year on a relative basis this quarter. Now this is coming from a small base, and we have a lot of work ahead of us. But it is an important sign that we are moving in the right direction. These product efforts paired with consumer marketing helped drive daily active users and offset headwinds in users coming from search. Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter. But the bigger picture is unchanged. The commercial business is strong.

Our revenue growth is differentiated. And we have much to be encouraged by on the product side. While our visibility into referral traffic remains low, we are not building for drive-by traffic. We are building a daily destination. Our product work is what will get us to our goal of 1 billion daily users globally and 100 million in the US. That work takes time to gain traction. But it is what will deepen engagement, strengthen our monetization flywheel, and drive more durable growth. The Internet is divided between machines and humans. there is room for both, but we know who we are building for. People will always want to hear from other people.

Real opinions, expertise, stories, and communities where they can ask, learn, argue, and belong. Reddit has continued to grow through every major change on the Internet because the underlying need has not changed. Human connection is existential, and Reddit is the most human place on the Internet. That is why I am so confident in where we are going. Thank you, as always, for being along for the ride with us. Now I will hand it over to Jen.

Jennifer L. Wong: Thank you, Steven. Hello, everyone. Q2 was another strong quarter for Reddit. Reflecting the momentum of our advertising business and the differentiation of our platform. Reddit's billions of conversations across hundreds of thousands of communities give advertisers a unique way to reach high-intent audiences and drive measurable, consistent returns. In the age of AI, authentic human conversations have become more distinctly helpful, desired, and valuable. We brought this message to life with the launch of our brand campaign, People Are the Best. The campaign celebrates the people who come to Reddit every day for real perspectives, recommendations, and advice. And the communities that help keep the Internet human.

And our research continues to show that no matter where the consumer journey begins, Reddit helps influence purchase decisions and accelerate outcomes. This message resonated at Cannes where we met more than 1,000 customers and partners. Helping people access human perspective is central to our mission and strategy to reach 1 billion daily users and to help advertisers connect with more audiences. Now moving to our results. In Q2, total revenue grew 61% year-over-year to $805 million and advertising revenue grew 64% to $762 million. Reflecting broad-based strength across the business. Revenue growth was driven by both pricing and impressions, demonstrating the increasing value we deliver to advertisers.

Reddit's content and communities combine search-like intent, with the depth and breadth of social, creating a distinct and valuable audience for advertisers to reach and drive results. In Q2, we turned this intent into outcomes with conversion volume growing over 100% and click volume growing over 30% year-over-year. In Q2, mid and lower funnel performance contributed meaningfully. With revenue from dynamic product ads and app installs each more than doubling year-over-year. We saw strength across our sales channels, including large customers and our scale channel. Our scale channel revenue, which includes mid-market and SMBs, doubled year-over-year. We also saw strength across industry verticals, particularly retail and travel, while active advertisers grew over 70% year-over-year.

Now I will discuss our progress across the ad stack. Our strategy is to make businesses of all sizes successful on Reddit, by delivering market-competitive outcomes across objectives, and our ongoing investments are measurable and delivering returns. We are executing against three areas. Scaling automation through our ads platform in Reddit Max, delivering advertiser value across the full funnel, expanding the Reddit for Business ecosystem. Starting with automation. Reddit Max launched a private beta earlier this year and we are seeing strong adoption and performance for mid and lower funnel advertisers. The number of advertisers using Max grew over 60% from Q1. While Max revenue grew over 150% during the same period.

We continue to add capabilities to the Max suite. In Q2, we added the app install objective to Max campaigns, and launched tailored creatives, which use AI to identify relevant communities and audiences, then design variants on advertiser creative to improve ad relevance and performance. Max campaigns are proving to drive better performance for advertisers and drive a high-LTV customer. For example, Lenovo achieved 40% higher purchase value with Max than with a standard campaign. Demonstrating how AI-driven optimization can turn high-intent users into high-value customers. Looking ahead, we plan to expand Max to a broader range of advertisers and make it the primary onboarding experience for SMBs.

We also plan to introduce new features that simplify activation and continue enhancing our models to drive stronger performance. Now moving to our progress across marketing objectives. With more than half a billion weekly users, Reddit delivers strong outcomes for brand advertisers in the upper-funnel. Video views was our fastest-growing upper-funnel objective, more than doubling revenue year-over-year. Our six-second engaged video views goal, which became generally available in January, helps video-first advertisers optimize for longer, more meaningful views. In testing, the objective delivered over 130% lift in six-second view-through rate. Over 70% increase in video completion rate, and an 80% reduction in cost per six-second video view with auto-bidding.

Video is a growing user and ad content format on Reddit, and an area of continued investment across the consumer and monetization road maps. We recently launched video and comments, And with investments in our interactive and AMA ad format, we see an opportunity to offer advertisers more distinctive creative experiences that help them build brand awareness, and connect with their customers in a unique way on Reddit. In the lower funnel, shopping and app install objectives are delivering measurable growth and outcomes for advertisers. Max campaigns for app ads entered beta with tests showing an average 15% reduction in cost per action and a 28% increase in results volume.

Using Max campaigns on Reddit, online pharmacy DocMorris achieved a 20% lower cost per install. And scaled spend after also seeing a cost per purchase that outperformed benchmarks by over 70%. Shopping on Reddit continues to be an exciting opportunity. Building on our dynamic product ads road map, we launched an alpha test of shopping listing ads. This multi-advertiser product carousel matches product catalogs to high-intent shopping conversations, which are growing 40% year-over-year on Reddit. The format expands our performance offering beyond single-advertiser catalog ads, and it is designed around the way people compare products and make purchase decisions on Reddit. Now turning to measurement.

We made important investments in our first-party tools while third-party research further validated Reddit's impact and strengthened our position within the broader ad measurement ecosystem. In Q2, we launched dual attribution in beta, giving app install objective advertisers better visibility into Reddit's role throughout the consumer journey beyond what standard last-touch models may capture. With dual attribution, we combine our first-party attribution signals with existing mobile measurement partner signals to improve our ML models, campaign optimization, and advertiser outcomes. Third party research is validating our impact across categories and geographies. Research from Attain and Circana found that Reddit delivered 1.5x higher return on ad spend for CPG advertisers than other social platforms on average. Across the U.S. and Western Europe.

The research also showed that Reddit shoppers generated higher lifetime value across categories including food, beverage, and personal care. In another study, TransUnion identified Reddit as the most efficient paid social channel in EMEA for retail advertisers. Driving an average 7x higher return on ad spend with 13% of Reddit's impact also lifting other marketing channels. Lastly, I will discuss how we are expanding the Reddit for Business ecosystem. Building more always-on relationships and making it easier for advertisers to scale their spend on Reddit through our ads API and credit lines. Ads API revenue grew over 40% from Q1, and more than half of our revenue comes from credit-line relationships. Our Shopify integration became generally available in May.

More than 500 accounts are now integrated with strong activation rates and average revenue per advertiser. We now plan to focus on improving the Shopify product experience, acquiring merchants, and increasing dynamic product ads adoption among integrated clients. Overall, this was another strong quarter for Reddit, Our commercial momentum reflects both strong execution and the differentiated value of the Reddit ecosystem, which is helping our partners generate consistent and durable outcomes. Thank you for joining us and for your continued support. Now I will turn the call over to Drew.

Andrew Vollero: Thank you, Jennifer, and good afternoon, everyone. The financial headline from a strong Q2 is that Reddit's consistent revenue growth continue to fuel compounding growth in cash flow and profitability. Specifically, Reddit grew more than 60% for the eighth consecutive quarter, while operating cash flow, adjusted EBITDA, net income, and GAAP EPS all more than doubled in the quarter year-over-year. it is not often most key profit and cash flow metrics double year-over-year. These results speak to the fact we continue to maintain a healthy balance between growth and profitability. Q2 was our fifth consecutive quarter where our revenue growth rate plus our adjusted EBITDA margin was over 100%. And we are converting that strong growth and margin into cash.

It was great to see that we crossed $1 billion of operating cash flow on a trailing 12-month basis for the first time. I will now provide more color on our Q2 results. Q2 revenues of $805 million grew 61% year-over-year, driven by ad revenue of $762 million, which grew 64% year-over-year. Other revenue reached $43 million, up 24% year-over-year. U.S. Revenues were up 56%. International revenues were up 84%. Average revenue per unique user grew 36% year-over-year to $6.18. Moving to expenses.

Total adjusted costs and expenses, which include both adjusted cost of revenue and adjusted OpEx, were $462 million, up 39% year-over-year. that is very consistent with the 41% rate of cost growth we have seen over the last 4 quarters. Gross margin was 91.3%, up 50 basis points versus last year. We saw margin tailwinds from incremental revenues and hosting efficiency programs, offsetting the increased use of compute, including higher AI inference usage. In the quarter, cost of revenue was $70 million up 53% year-over-year. Which includes thoughtful investments we are making in such areas as machine learning, site performance and safety, and ad targeting.

Now, operating expenses remain the far larger piece of our adjusted cost base. it is more than 80%. In Q2, we saw two positive takeaways. 1, adjusted OpEx was $392 million, 49% of revenue compared to 57% last year. So we continue to get cost leverage. And then second, as Steven mentioned, we crossed $1 million of revenue per headcount on an LTM basis for the first time. This was an important North Star we set at our IPO, and a positive signal of an increasingly efficient, more effective team here at Reddit. On hiring, we added about 100 people in Q2. We evaluate resource needs with an ROI mindset.

Focusing on clear opportunities to improve the consumer product, the ad stack, and coverage of advertiser accounts. We view marketing spending as an important enabler to reach our bold North Star goals of 100 million US users and 1 billion worldwide DAUs. In the quarter, overall paid marketing results were mixed. We did see some encouraging signals with our newly launched brand campaign called People Are the Best, but user acquisition spending needs stronger attention to improve returns. We will continue to evaluate the mix of our spend moving forward. Overall, in Q2, total marketing spend was slightly higher sequentially on a percentage of revenue basis across both paid and brand marketing.

Finishing up on cost, stock-based compensation and related taxes were $107 million or 13% of revenue, well in line with benchmarks. SBC was sequentially higher, primarily driven by the timing of our annual grant, which happened in Q2. Even with that timing impact, dilution remains manageable. Total fully diluted shares outstanding were 207 million, up 0.3% sequentially and up 0.2% year-over-year on a net basis considering share repurchases, which became a more meaningful tool this quarter. We repurchased about $235 million worth of stock about 1.5 million shares at an average price of around $157. We have about $760 million left on our current authorization.

Sequential dilution was up 0.3% on a net basis and 1% on a gross basis excluding the impact of share repurchases. A couple more financial points of interest. First, income taxes were slightly higher in Q2, than the prior year, but the effective tax rate remains modest. Net income was $253 million, $1.31 per basic share and $1.25 per diluted share, multiple times the $0.48 and $0.45, respectively from a year ago. Operating cash flow doubled from $111 million last year to $262 million this year, while CapEx was $1 million and less than 0.2% of revenue, so still very light.

We ended Q2 with $2.8 billion in cash, cash equivalents and marketable securities, up over $700 million from a year ago and slightly higher sequentially as cash generated from operations was mostly offset by cash used for repurchases. So now turning to the outlook, we will share our internal thoughts on revenue and adjusted EBITDA for the third quarter. Then I will cover a few additional items for the back half of the year. In the third quarter of 2026, we estimate revenue in the range of $860 million to $870 million representing 47% to 49% year-over-year revenue growth with a midpoint of about 48%.

Adjusted EBITDA in the range of $385 million to $395 million representing 63% to 67% year-over-year growth. And an adjusted EBITDA margin of 45% at the midpoint. The Q3 guide reflects continued momentum in the business, also takes into account our current investment plans. I will also share an outlook for stock-based compensation. We are lowering our full-year expense guide for SBC from the high teens as a percentage of revenue to the low-to-mid-teens as a percentage of revenue. To date, we have seen good leverage on this expense. it is less than 13% of revenue to date, down more than 1,000 basis points versus the first half of last year.

In Q3, we do expect SBC and related taxes to be between $140 million to $155 million as prior grants at lower share prices vest and were refreshed with grants at higher share prices. We also expect our full year dilution to be at the lower end of our 1% to 3% targeted range. This is before considering any additional factors like buybacks, which would lower the number further or acquisitions, which could increase that total depending on the scale of the deal and the cash-stock mix. Additionally, as we announced earlier this year, Q2 will be the last quarter we report logged in and logged out user metrics.

In Q3 2026 disclosures, we will continue to report total US and international daily and weekly active users but will no longer report logged in and logged out daily active users. As we move forward, we will continue to assess our user reporting and we will ensure it reflects how we look at and run our business. So to summarize, Reddit continues to scale in a one-of-one way. Most of the major profit and cash flow metrics doubled in Q2. Revenue and monetization continue to grow at a differentiated pace, Margins remained strong. CapEx was light.

And we began to deploy capital in a more meaningful way. it is particularly encouraging to see the way cash flow is scaling As I mentioned upfront, on an LTM basis, Reddit's operating cash flow crossed $1 billion. We have liquidity and cash capacity to satisfy our 3 capital priorities, which are first, investing in the business; second, opportunistic M&A; and third, share repurchases, while maintaining a high level of profitability. That concludes my comments. Let me turn the call back over to Steven.

Steven Ladd Huffman: Thanks, Drew. Before we turn over to the group for questions, let me take 1 from the Reddit stock community. The question is, what is a memorable conversation and moment you had at Cannes? Let me give you a couple. The first thing that came to mind was 1 of our brand ambassadors, I had to clear up that, yes, I work here, and no, I am not 28. The second more business focused is without naming names, had a couple of meetings with brands that we have wanted at customers for a long time. And it is it is just more of the same trend.

More and more folks are really starting to get Reddit and understanding how important it can be to them. So really encouraging there. Then overall, I think I would love the way our team shows up We did I think, over 500 meetings. And that is just about all of our customers or all of our large customers. And so it is just really encouraging to see folks, I think, really appreciate what we are trying to do. Thanks for the question. Okay. Julianne, let's open the line up for questions from the folks there.

Operator: Thank you. I would like to remind everyone, in order to ask a question, press star then the number 1 on your telephone. Our first question comes from Tom Champion from Piper Sandler. Please go ahead. Your line is open.

Tom Champion: Great. Good afternoon. Very strong quarter commercially. Jennifer, what drove the strength in the ads business this quarter? And then for Steven, as you think about Q2 and early Q3, what do you want investors to understand about the trend in user growth? And your ability to drive high-quality users to Reddit? Thank you.

Jennifer L. Wong: Okay. Thanks, Tom. I will take the first question. Okay. I think it was another strong quarter. You see the consistency in our business. Number 1, I think our message is resonating with advertisers broadly. I mean, our influence in the purchase decision journey, I think, is clear. And you know, the I think, increasingly, they realize that their customers are putting an increasing value on human advice. And Reddit is the place for that. So they realize how important our environment is. We continue to deliver, like, market-competitive outcomes. And our strategy, I think, just continues to build momentum. Like, our strategy has been making every impression more valuable.

When you look at the volume of conversions growing and clicks growing, what that means for an advertiser is that they are getting more outcomes, at equal or better prices. So we are just getting more competitive with all the signals, ML work, and opto work that we are doing. The other piece that I think is really kicking in is very strong adoption of our tools. So this is making it easier to onboard advertisers. So this is why, you know, you see advertiser growth, like, 70% year-over-year. Because we are able to make it easier to onboard advertisers We are then delivering more efficiency, which retains them and allows them to scale spend.

And then we are making it easier for them to stay always-on with more credit-line adoption taking friction out of working across the funnel. And then finally, what I will say is, like, I think our business is diversifying across so many dimensions that it is made it really resilient. So, you know, if you look across verticals, like, 11 out of 15 verticals grew over 50% year-over-year. Our MA you know, our active advertiser count grew over 70%. Our scaled channel, which houses mid-market and SMBs, doubled. Rest of World grew 80%+. So our footprint is just getting so much more diversified, which makes our business also very resilient and flexible.

Steven Ladd Huffman: Second question. Tom, thanks, about users. As we said last quarter, our goal is to achieve 1 billion daily users globally and 100 million in the US. there is no change there. Reddit is a destination. And in The US, we have nearly 200 million users coming every week. And we primarily grow through our product work, and that is how we drive daily direct users, and we are making progress there. And we added through that product work DAU in the quarter it was offset by a decline in search referrals. So first, on the product, we improved new app user retention. This is one of our most important metrics and priorities.

It was up 50% year-over-year on a relative basis. We grew our reach. We crossed half a billion weeklies. US and international weeklies both grew sequentially. On the contribution side, we made it easier to find and post in the right community. So there are now 26 billion posts and comments on Reddit. with 1 billion added since Q1. Our thriving communities are growing significantly. And we are more effectively converting web users into higher value app and direct users. And we saw success with video and comments, which is expanding our upper-funnel. We did see headwinds in search referrals, particularly late in the quarter, and visibility with the referral traffic remains low.

But we are focused on what we can control, is our direct users driven by product efforts, and we believe this work will be transformational. It will take time, but this is how we get to that 1 billion global, 100 million users in the US.

Operator: Thank you. Our next question comes from Ronald Josey from Citi. Please go ahead. Your line is open.

Ron Josey: Great. Thanks for taking the question. Maybe a quick follow-up to Tom's question. And Steve, you mentioned in the letter that growing DAUs is a top priority. I know you just talked about app usage and the quality of the traffic. But talk to us a little bit more just around the products that can convert call it, the pretty strong WAU growth to DAUs. And particularly, I wanted to hear more about, the focus on the feed. And then, you know, there is been a lot of articles and press reports just about the data licensing partnerships that you currently have.

Any updates on strategy as you approach this or anything, as we get, as we get closer and closer to call it, the renewal rates in early Q1 for others. Thank you.

Steven Ladd Huffman: Sure. Thanks, Ronald. So on users, yeah. So focused on the WAUs to DAUs would be an increase in frequency. We drive that primarily by making Reddit more sticky. You mentioned the feed. Think over the short, medium, and long-term improvements to our feed, will improve that frequency. I think there is a lot of headroom there. If I am to be frank, I think our feed technology is just behind the state-of-the-art. Which gives us a lot of headroom to catch up. And I am particularly encouraged at the talent we are bringing into Reddit over the last quarter to help build that next generation of feeds. But all the little stuff works too.

So we did hundreds of experiments in the last quarter and many of them worked on their path to GA. Of just kind of chipping away at retention and quality which drives that growth. And so this is in onboarding. This is in posting. This is in performance. Across the app. So really starting to feel that momentum. And then I mentioned conversion. Right? So this is taking that big top of funnel web user base we and converting those into mobile app users We have been dialing that up as well and driving more downloads And those users, many of them are already Reddit users, and they retain quite well and do even better in the app.

So we are seeing a lot of progress across the board there. I think, again, a lot of headroom. On data licensing, no change in strategy. Working hard. Reddit's content is in demand, and it is not commodity content. People seek it out intentionally by name, and many come directly to Reddit. Our relationships here are multifaceted. So Reddit for used for training. it is used for post training to teach these models how to talk. it is used for grounding. it is used as a as a search index. And so there are many layers and dimensions for how this can work. Reddit's Data is valuable beyond just raw training data. And these deals are not binary.

They have to make sense for Reddit, but there is many ways, I think, for the value to return to Reddit. But our goal is to maximize the value returned to Reddit. Thank you. Great quarter. Thanks, Ron.

Operator: Our next question comes from Richard Greenfield from LightShed Partners. Please go ahead. Your line is open.

Richard Greenfield: Steven, I do not wanna belabor this point, but your stock is down sharply because there is just sense from investors that you have a I do not want it to be blunt, a user problem, especially in The US that users are you know, it is only a slight tick down, but they are ticked down despite all of the investments you have made over the last year. And I certainly hear you on the weekly improvement, but people are looking at The Daily and saying, you know, the logged out traffic is gonna be under pressure because as search shifts to AI, you are not gonna get referrals.

And that it is gonna be harder to get people to go from logged out to logged in. And that is sort of symptomatic of what you are seeing. And so you are buying back a lot of stock. You do not seem concerned, or you and Jennifer seem very confident. You, Jen, Andrew, all seem very confident I guess, what gives you so much confidence that you are gonna grow to, you know, 100 million logged in users in The US and 1 billion globally versus the slight tick down this quarter Because there is obviously a big disconnect, and it is obviously impacting your stock. And then just the second piece of that to follow-up on Ronald's question.

Do you see any world where you are not licensing data to Google and OpenAI next year? Okay.

Steven Ladd Huffman: Thanks, Rich. So look. Let me start with the end first. We are confident. Because our product work is working. Reddit is communities in conversation. Communities are universal. And so we think we have, in The US, content for everyone. And it is a matter of revealing that. And we are making progress towards that end. Moving new user retention in the app significantly in a quarter is something that we are very proud of, and that sort of improvement in retention drives growth. And that is work that we are in control Yes. Search is external search is volatile. Particularly logged out web. that is not where our business lives.

And we will make sure that we get as much value from that traffic as we can And so that is where we have been driving conversions from web to app, and that is become more effective as well. So long-term, we are as confident as ever that we are gonna get to those milestones that we have set. But the work does take time, and we do have a lot of work to do in the product. But driving that direct growth is in our control, and we are seeing some progress. There. Is there a world in which we do not do licensing Well, I think the range of outcomes is wide.

And we have to look at know, every aspect of this and make sure that we are maximizing value to Reddit. You know, within Google, it is not just licensing. there is-- our relationship with them actually predates the formal and the data licensing agreement. Our long history in 10 blue links and now the Reddit's placement and AI overviews alongside licensing And we have also seen this development in or an expansion of how Reddit's content is used, both with them and others. So I do not think there is a binary outcome. I think all of these different touch points whether we are talking about training or blue links or AI overviews or whatever next.

Those are all independent decisions. And we will make sure that we are maximizing the value to Reddit. But for us, it is not just traffic. or clicks. We want users into the Reddit ecosystem. Right? Reddit is a community in conversation product, and so we want to bring users into that ecosystem and that flywheel of Reddit. And so that is what we are looking to do in any of these Are there more buyers of that data than just Google and OpenAI in your mind? Of course. 1 of the things that we have seen over the last year is more and more people interested in Reddit's data for different use cases or at different scales.

And so do look at this as an expanding marketplace with lots of different opportunities.

Operator: Our next question comes from Mark Stephen Mahaney from Evercore. Please go ahead. Your line is open.

Mark Mahaney: 2 questions, please. You talked about these headwinds in search referrals late in the quarter. Just put some context around this. Is this something that just pops up from time to time, with those headwinds greater than what you normally see, less than what you normally see? Any interpretation as to what caused those referrals? And then just back on the licensing, please, Any expectations you wanna set as to when we will get you will get we will get resolution on licensing, you know, by the end of this year, halfway through next year? You know, anything like that? Thank you very much.

Steven Ladd Huffman: Thanks, Mark. So on the traffic yeah. So the search ecosystem continues to evolve. We have seen changes like this before. I will not comment on the magnitude but I think what I have said before is this is not our first rodeo. And I have I have used that phrase on these calls before. And so we do see these changes Specifically, we do not typically get much insight into what is going on. In this case, we have seen a couple of different aspects to it. 1, we saw a decline in our machine translated content. So this was part of the volatility on the international side.

Machine translation remains a useful strategy within our app for new users. So we have content to show them. And then with the evolution towards AI overviews, think more broadly, what we see is you know, 10 blue links has driven tremendous value and growth to the broader ecosystem. From where we sit, AI overviews has yet to make a similar level of positive impact. And I think that is consistent across the broader landscape. Right? Us, businesses, publishers, retailers. But we are still looking for that win. But our visibility on search continues to remain low, and we expect it to probably continue to be volatile.

So what we are focused on is making Reddit a destination and driving more direct traffic. To our app.

Operator: Our next question comes from Justin Post from Bank of America. Please go ahead. Your line is open.

Justin Post: Great. Thanks. I will try a different topic. Jennifer, you know, you think about where you are with The US, you did over $20 in ARPU in the first half, approaching $50 for the year. How do you think about where you are with ad loads, auction density, advertiser ROIs? Is there still room to grow that significantly from here on your user base? And then maybe 1 for Drew. How are you measuring the returns on your marketing spend? Thank you.

Jennifer L. Wong: Yeah. Happy to take that. Look. I think we still have a lot of all through headroom because look at our road map, and I see lots of ways that we can to deliver value for our advertising partners, I e, more outcomes, at more competitive prices. You know, if you look at we are a marketplace. Right? So what is great about a marketplace is that you know, you can you can have this be demand driven as well as performance driven. So there is a lot of flexibility in the marketplace for the market to meet each other in terms of the supply and the demand.

I do think that, you know, when I when I think about the headroom that we have, it will be driven by I think, a lot of the outcomes across the funnel. So if I had to give you where I think we are driving incremental value to advertisers today, it is that six-second guaranteed video view is incredibly valuable. it is been a really nice performing product for us, and we are, you know, being Reddit with high-intent. We intend to go, like, deep on that view, and that is a really high-quality high-value view.

Obviously, the volume of conversions, the volume of app installs, the volume of leads, This is an area that we will continue to do work. So I feel really good about our ability to continue to drive our strategy, which is to make every impression more valuable. And so long as we do that, I think that continues to fuel our business. And continue to fuel our ARPU.

Andrew Vollero: Justin, the primary metric we use on to evaluate marketing spend is really a very straightforward cash model, P and L based looking at a, you know, kind of acquisition of a user, the cost of the user, looking at the retention of that user, the monetization of that user, netted out over a pretty short time frame. So, overall, it is a pretty consistent look, I think, across the industry. Give you a real straight value. Once in a while, we will we will look at the balance sheet value. We will look at the value of a user overall.

But mostly, it is it is it is a very straightforward kind of ROI based quick payback model in the short term. that is how we think about it.

Operator: Our next question comes from John Colantuoni from Jefferies. Please go ahead. Your line is open.

John Colantuoni: Great. Thanks for the questions. I wanted to come back to engagement. As you look to continue driving engagement, how do you see that impacting the experience for users on the home page versus in subreddits? And could you see the feed looking more like some other social platforms that are doing a good job marrying machine learning and video content. And the second question, maybe just on Reddit Answers and search. You give us give us an update on engagement trends within Search and where you are in launching a generally available advertising offering on that surface. Thanks.

Steven Ladd Huffman: Okay. I will take the first two, and maybe Jennifer comment on the ad. Okay. So thanks for the question, John. In terms of engagement distribution across the app, even today, the primary surface is the home feed versus subreddits. And so this is why it is such an essential service, and this is why we are surface and why we see so much headroom in improving our performance there, improving the technology that backs that feed. Because it does a lot of the heavy lifting of juggling a user's subreddits and 1 of the primary drivers of subreddit discovery. So I expect it will continue to do much of the heavy lifting.

You are touching on something that we are working on right now, which is how do we show video in the home feed. This has been something on our minds for a while getting this right, especially as we have more and more video content on Reddit. And so there are two aspects to this. The first is just generally, how do we make a video work in the feed because it is such a mixed media feed. Right? You have got video. You have got text. You have got images. So those flows between from feed to theater mode to the comment page back to the feed are essential.

Think I know there is a lot of opportunity in front improvement there. We are working on, I think, some things that really streamline that and help The other thing we are working on is just a video Reddit experience. So letting users not just watch video on Reddit, but listen to posts, background-listen to posts. We see folks doing this off platform. there is an emerging content type elsewhere on the Internet of basically podcasts where people read Reddit content. I think this version of, like, listened to or spoken Reddit can be really engaging as well.

And so that would be almost a different format entirely. there is a lot of things that we are working on now that I am looking forward to testing later this year. On answers and search, making steady progress there. The search bar is now universal within the app. We grew both searchers and searches in the quarter. And I think, you know, for many queries for many queries that I run at least, Reddit is now the best platform for searching Reddit. That has not always been the case. And so we are chipping away at that. But I think any query where you want to know something or wanna see multiple perspectives, like what should I watch?

What do people think about this? What should I buy? Reddit provides the best answers on the Internet. So I am really encouraged with the progress there, and we are starting to look towards ads on that surface, which I will turn it over to Jennifer to address.

Jennifer L. Wong: Yeah. So you know, search is in a space where it is very married to, like, a shopping experience. And so we there is a couple of different angles to this. 1 is that we think that the search page can be enriched with more, like, rich media modules. So it can have product visuals from the catalogs that we have when people are searching or discussing or, you know, specific product. And we started to do that. We had done a test early on, electronics and consumer electronics, and now we have expanded those categories. And so that enriches the core search experience and hopefully increases engagement. People get more out of that experience.

And I do agree with Steven that I think especially the agentic Ask function on Reddit search, think, is now the best way to search Reddit. The second is what goes along with that engagement at the you know, product level when you have a match is ads. Right? So we I talked about our shopping listing ads where you can have a module that has multiple different retailers. And product types and brands in 1 module, that is a great ad sort for a search page. And that is ultimately how, you know, I think ads would be well represented on search. So that is a space that we are eyeing. We clearly have the capability to do it.

We keep you know, tracking as the page settles and as users adopt that. You know, we will we do see an advertising opportunity there. And the good news is we have the infrastructure, and I think a lot of that capability already queued up.

Operator: Our next question comes from Josh Beck from Raymond James.

Josh Beck: Thanks for taking the question. Maybe more of a multi-pronged question on the product side. So the new app user retention, you certainly highlighted as the area of early success. I think you said it was up maybe 50% year-over-year, small base. But just kind of curious specifically what drove that, and I assume that is part of the confidence in the product work that you have moving forward. And then on the feed models, I do not know if you can, you know, maybe give us some type of overview into the drivers. Obviously, there is a lot that goes into building these models.

Between retrieval and ranking and serving and refresh and, you know, there is a million different parameters and probably do not wanna get too much detail. But just kind of any sense you can give us on maybe what are some of the specific areas you are focusing within the feed improvement. Thank you.

Steven Ladd Huffman: Sure. Sure. Thanks, Josh. Okay. New app user retention. Yes. 50% on a relative basis. Which it is a hard number to move, and it is 1 of our most important. it is, I think, our best measurement of product quality. So do users open Reddit and then want to come back next week. that is what we have been moving there is a number of factors here. 1 of the biggest is conversion. So we are basically taking core users, frequent users from the web and turning them into app users where they become even better users. And we have a lot of those. Second is within the app itself. So onboarding is much improved.

So more effectively, connecting users to their home on Reddit. Some of the in the trenches work around login, account recovery, preserving logins after reinstalls, all of these things. Add up. And have pushed this number higher. I think both the new retention or the new user retentian absolute basis has still a lot of room for improvement. This is what we have been talking about for years. Once users get Reddit, they really get it, but it can be a hard product to get. So every time we make it easier, we grow. And so this is the healthy mix shift we have been looking for, and I can start to see the momentum.

That is why we are confident. On the feed, you are right. We could talk about this all day. I would say, broadly, our model the models we use today are smaller than state-of-the-art, significantly smaller. So we can scale up the size of the model. Our models update slower. So days, versus state-of-the-art, which is hours or minutes. And the amount of our like, user activity that we actually incorporate into the models is, like, 10% of our user activity. You know, where that could be you know, significantly higher. So, basically, across the board oh, and our and our the category set, the candidate set.

So posts that are eligible for recommendation, Reddit right now is limited to a week. And so Reddit is basically our feed is almost like a real-time feed where we have this actual massive corpus. Much of that content is timeless. Think about things like know, parenting advice or book or movie reviews, things like that. Are relevant for a very long time. We do not show this on the feed at all. So we can dramatically improve candidate selection, model size, model speed, the signals that go in from users--pretty much every dimension. We have you know, sometimes order-of-magnitude improvement opportunities.

So I will be doing that work over the next year, and I expect every improvement we make to work because we are just starting from, you know, such a low base.

Operator: Our next question comes from Andrew Boone from Citizens. Please go ahead. Your line is open.

Andrew Boone: Thanks so much for taking the questions. I wanted to ask about SMB. Do you guys have Shopify coming on board. It sounds like Max is doing well. Can you just unpack the success that you are seeing with SMBs? And then what should we be thinking about as we think about the back half of the year in that group? And then, Steven, just going back to engagement. If I think about the feed and platforms that are scaled, everyone kind of has a creator ecosystem that is scaled down to that billion user level.

Do you guys need to do anything different in terms of the content that is on the platform to really get to the scale, or do you guys think you have what you need today? Thanks so much.

Jennifer L. Wong: I will take the question on SMB. So this is a segment that is been growing really nicely for us, but there is just still thousands and thousands of SMBs globally that are not yet on our platform. You know, couple things. We continue to acquire into this channel. And, obviously, Shopify is a partnership that allows us to do that. We will be doing some joint marketing efforts to, you know, accelerate the acquisition now that we have the capability to sync in catalog and have CAPI, you know, integrated into Shopify automatically. From Shopify merchants. So we will really be ramping up you know, sort of that co-marketing effort.

The second is the onboarding to SMB today is not the optimal onboarding with Max. We are still doing the foundational work on what is the right entry point for SMB. That takes out more friction, that is more tailored their needs, and that allows them to onboard and join Max faster. So that is to come. that is ahead of us, but we think that will be really important for reaching, you know, more acquisition smooth you know, smoother acquisition, ramping of acquisition. As well as, you know, a great experience faster on our platform. So those are the things that, you know, we have in the hopper. Against SMBs.

Obviously, SMBs also benefit from all the horizontal work we do, generally making all of our objectives you know, more efficient. Know, that is everyone benefits from that. I mean, I feel really good about the momentum in our SMB business. But I think there is a little more tailored product work that we wanna do to for this customer set.

Steven Ladd Huffman: Okay. And then on the Creator Ecosystem, there is A Lot Of Progress That We Made In This Quarter. So posts per logged-in DAU and comments per logged-in DAU, globally and in the U.S., are all up. As is thriving communities. And there is a lot of work behind this. So we have got a new post composer on both mobile and web, it is easier to post. New comment composer. We are better directing users to which subreddit they will be successful posting in. Making better community recommendations, And we are also working on what I think is 1 of the biggest opportunities, which is post success. So making it easier and more consistent for new users.

1 of the challenges right now is new users are likely to have their posts removed because their account is not old enough. These are kind of long-standing strategies that have not aged well. And so using LLM-assisted moderation, we can help bring in the prospective great user and continually get better at keeping the spammers and other bad behaviors out. Video and comments are a new feature that is already more than 10% of our video posts from that feature, and so we are seeing nice engagement there as well. I do think our creator ecosystem will look different than what you see on other platforms.

The way I have often described it is the social media platforms are for the 1% of creators. And Reddit is for everybody else. Our view is that everybody has something interesting to say, even if you are not a professional content creator. But everybody has a question. Everybody has a need. Everybody has a bit of advice to give. Something interesting to share. And that is what Reddit is for. And so I think of social media, a lot of professional content creators and Reddit is for everybody else.

But making it more making Reddit easier to post to and increasing the post success rate, for everybody is the name of the game for us, but we made some nice progress this quarter.

Operator: Our next question comes from Benjamin Black from Deutsche Bank. Please go ahead. Your line is open.

Benjamin Black: Great. Thank you for taking my questions. Just a follow-up on marketing spend. It does appear just given the ARPU that you are generating per user, that the ROI on that spend should be quite attractive. So I guess the question really is, why not spend more? You know, what are you seeing in terms of the retentiveness of the users that you are bringing through? some of these paid channels, and what can you do to improve it, I guess? And then and then, Drew, incremental margins have remained exceptionally strong. Right, as the company continues to scale, where do you see the largest remaining opportunity for operating leverage over the next few years? Thank you.

Andrew Vollero: Good. Let me let me take that 1. Look. On the on the marketing side, look. We think that marketing is a very important piece to get to our goals. Like, that is really important. We certainly want to continue to do user acquisition spending. I spent I spent a minute talking to Justin about, you know, what our model is. Pretty straightforward model. I think it is very similar to other folks in the industry. I think the key unlocker there is we just need better user retention. As Steve said, you know, we are up 50% this quarter. that is starting to speak to the to the product work, but there is still more work to do.

I know on a relative basis, we are lower than others in the space. So we are gonna continue to try at it. I would say on the marketing side, we did also launch our people are the best-- people are the best campaign this quarter. You know, that really shook some things up. We had a lot of positive press from that. And think, you know, the more that we can balance the user acquisition growth with, or the user acquisition spending with brand spending, I think we will end up in a better place. And so I think overall, you know, we are committed to the spend in the in the marketing area.

We think the brand will benefit from it. We would like to continue to invest through it. I think there are dialogues about do we maybe spend a little bit more on the brand. But overall, I think we are I think the real unlocker on just getting more UA spending would be just better retention. Like, it is that simple. We have a great model from a gross margin perspective, so an incremental user here is worth a lot. You are pointing out the ARPU. it is very high. Those are 2 things that are terrific here. They should really help us.

We just need a little bit more from the retention, and we could really you know, move on this 1. Your second question was around the incremental margins. Look, you are right. We have been running incremental margins in the high-50s, low-60s for the better part of a couple of years. The incremental margins here are powerful. We do not manage the business for incremental margins. We look at individual ROI. On investments. I think we continue to be you know, very fortunate with the incremental flow-through here. When we get revenues, you really can, particularly on the gross margin line, you can flow those between 95% and 99%. And so that is how I really think about incrementality.

And then it is just a question of what investments that we want to make. Mean, I think right now, we make the investments that we wanna make. We do not hold investments back because we say, well, jeez, we need we need the incremental margins here to stay the high-50s. that is not the way the company runs. We really look at individual investments where it makes sense. We put the money behind it, we go ahead and do that. I think we have had a lot of success with our investments. We have invested a lot in the ad-tech stack. You can see that results in the monetization. We have invested a lot in our sales team.

You can see 8 quarters in a row of 60% or more. So those have been 2 of our probably more prominent investments. As Steve mentioned, we are investing a lot of talent to bring in, you know, machine learning talent and really just upgrading our growth team in a in a meaningful way. So those are investments we make. We make those investments because it is right. I do think the margins continue to accrete here. The long-term goal is 50%. And so that is what we are focused on right now. And I think most of that will come from just leverage off of incremental revenues.

There are not huge pockets of costs that we are sort of staring at right now and say we could take that out. That would be my take on your, your question.

Steven Ladd Huffman: Julianne, I think we have time for 1 last question.

Operator: Our last question today will come from Jason Helfstein from Oppenheimer. Please go ahead. Your line is open.

Jason Helfstein: Thanks for squeezing me in. I will ask one. So you are obviously calling out the importance of, we will call, like, high-quality user--you know, app user logged in. The a lot of different ways you think about a high-quality user, but is the takeaway that you want us to view here as well. You may be hurt by referral traffic. That if, you know, is a high-quality user worth, you know, kind of I do not know, multiples of, let's say, what one referral-traffic user is worth. So it is not necessarily you know, equal.

And so while the street is focused on okay, you are down 300,000 you know, DAU sequentially US, the idea that you can offset that over time with your mix of higher quality user. Maybe just elaborate more on how you want us to think about the importance of a high-quality user maybe other metrics we will share about that in the future then?

Steven Ladd Huffman: Thanks, Jason. I think you have got it exactly right. The direct users, the app users, are worth yep, multiples more than the search referral traffic. We are you know, not building Reddit for that drive-by traffic. We are building Reddit for direct usage. And that is where our business lives. And you can see that in the performance of our ads business. Right? Despite search volatility, And we have seen volatility like this many times in the past. Our revenue growth has been very strong and consistent. it is because our business lives with those direct repeat users and growing that base.

And both through our conversion efforts and retention efforts, I think we have made nice progress this quarter. And that is the work that we can control. Regardless of what happens in the broader search. All right. I think I think that covers it. Thanks, everyone. We appreciate you joining. We look forward to speaking again soon.

Operator: This concludes Reddit's Q2 2026 earnings call. You may now disconnect.