Key insights
- Reddit (RDDT) beat its Q3 revenue guidance by $25M, with US revenue per user up 53% year-over-year, indicating pricing strength. However, the stock fell 29.2% due to a decline in US daily active uniques and logged-out users. Management guided total users down in Q4, raising concerns about the sustainability of revenue growth solely through pricing.
I forecast Reddit's Q3 before the October 29 report and then checked the model line by line against what they filed. Revenue was not the problem:
- Revenue was $895.0M, $25M above the top of the guide. My model had $900.6M, consensus $875.0M (26 analysts). - US revenue per user was $13.82, up 53% from a year earlier. Pricing carried the quarter. - EPS was $1.40 against my $1.41.
The miss was users. US daily active uniques fell to 50.7M from 53.2M in Q2, and logged-out US users, the ones who arrive from search, fell 4% year over year to 27.3M. International grew 24% to 79.6M, but management said some of that came from extra marketing to make up for lost search traffic, and guided total users down by a low double-digit percentage in Q4.
The stock closed Oct 30 at $91.73, down 29.2%, its worst session since the March 2024 listing.
Do you think pricing can keep outrunning the user decline, or does Q4 show the limit?
Data: Reddit's Q3 8-K, shareholder letter and daily prices, processed by Equibles. Not financial advice.