Reddit (RDDT +14.86%) is a popular news aggregation and social media platform that makes money primarily through advertising. The company was founded in 2005 by college roommates Steve Huffman and Alexis Ohanian, who got seed money from Y Combinator's Paul Graham to create the front page of the internet after he rejected their original mobile food ordering app.
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The meme stock phenomenon of 2021, driven by the r/WallStreetBets subreddit, brought Reddit unprecedented mainstream attention and underscored its influence on financial markets. The company filed plans to go public later that year but delayed its plans due to a cooling tech market. When the company finally debuted on the New York Stock Exchange (NYSE) in March 2024, stock investors saw shares pop nearly 48% from their $34 IPO price on the first day of trading.
Reddit has come a long way over the years, refining its business model and reaching profitability, but its growth story may be just getting started. Here’s what you need to know about how Reddit makes money, what it does, its financial health, and more.
Revenue
What does Reddit do?
Reddit is a platform where users submit content, such as posts, links, images, and videos, to communities called subreddits. Subreddits are niche forums or communities dedicated to specific topics, hobbies, or interests. There are hundreds of thousands of subreddits covering a vast range of subjects, from science and news to hobbies and specific fandoms.
Users, or Redditors, vote on posts using an upvote/downvote system to promote popular content to the top of discussions and the site's front page. Reddit serves as something of a digital town square for connecting over shared interests.
How does Reddit make money?
Advertising is Reddit’s most significant source of revenue. Companies pay to run ads and reach specific target markets within relevant subreddits. Reddit has also been working to increase its ad revenue through partnerships with professional sports leagues and by upgrading its platform's advertising features.
Reddit earns a smaller portion of revenue from its Reddit Premium subscription service. Users can pay a monthly membership fee to remove ads and receive other benefits, like access to custom avatars and other exclusive features.
A newer -- but important -- revenue stream to watch if you're investing money in Reddit is its data licensing business. Reddit is licensing its extensive collection of user-generated text data to artificial intelligence companies, which can use it to train their AI models. A significant partnership with Alphabet’s (GOOGL +0.67%) (GOOG -0.71%) Google has bolstered this revenue stream.
Reddit's financials
In 2024, Reddit delivered significant top-line growth but remained unprofitable on a generally accepted accounting principles (GAAP) basis for the full year. Total revenue for 2024 increased 62% year over year to $1.3 billion, fueled by a 50% year-over-year increase in ad revenue.
Reddit achieved its first-ever profitable quarter in Q4 2024 with net income of $71 million, but it posted a full-year net loss of $484.3 million. The platform saw strong user growth, with daily active users increasing 39% year over year to 101.7 million by the end of 2024.
Fast-forward to Q2 2025, and Reddit’s revenue reached $500 million, a 78% year-over-year increase. Notably, ad revenue grew 84% year over year. AI data licensing agreements generated $35 million in the second quarter of 2025, up 24% from Q2 of 2024.
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Recent developments
Reddit is heavily investing in AI to improve its search capabilities. The Reddit Answers tool, which provides conversational search results, grew from 1 million in the previous quarter to 6 million weekly users in Q2 2025. The company plans to enhance the integration of this tool into the main search experience.
Reddit has also rolled out new AI-powered tools for advertisers in 2025. These tools are designed to help brands convert discussions on the platform into insights they can use for marketing decisions.
Reddit is also implementing AI-powered machine translation to foster international growth. This feature allows users to automatically translate their entire Reddit feed, including comments, into their preferred language. Users can also post in their own language and have the post translated for others. The service has expanded to dozens of countries and is also being integrated into search engine results.
The platform is also in ongoing talks with major AI partners, including Google and OpenAI, to renegotiate its existing licensing agreements. The goal is to move toward a dynamic pricing model that provides greater compensation as its content becomes more critical to AI answers. For example, Reddit is proposing a new partnership where Google traffic would help drive growth by converting visitors into active contributors on the platform.
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