Reddit (RDDT) Q3 2026 earnings call transcript

Thanks, Jonathan. Hi, everyone. Welcome to Reddit's third quarter, 2026 earnings call. Joining me are Steve Huffman, Reddit's co-founder and CEO, Jen Wong, Reddit COO, and Drew Valero, Reddit CFO. I'd like to remind you that our remarks today will include forward-looking statements. 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, and 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 third quarter letter to shareholders and earnings press release are available on our investor relations website and investor relations subreddit. And now I'll turn the call over to Steve.

Thanks, Jesse. Hi, everyone. Thank you for joining us, and welcome to our quarterly earnings call. In Reddit's 21 years, the Internet has changed in ways that would have been impossible to predict. We've gone from flip phones to smartphones to personal AI agents. And through it all, Reddit has always owned our own corner of the Internet, offering people something that no one else does. Social media has evolved from friends and families to followers and famous people, and from status updates to the mindless scroll.

Web search is evolving from a gateway to the web to becoming an AI-powered destination itself. While extraordinarily useful and powerful, AI search solves a different problem than Reddit. AI does not fulfill people's fundamental need for community, connection, and belonging with other people, and it lacks context and nuance. The Reddit experience captures the human experience in a way that no other platform can replicate.

Only Reddit can help people navigate life's journey through the lens of other people's lived experiences. Only Reddit can help you feel both like a multifaceted, unique individual and a part of a greater whole, and do so without needing to reveal your real-world identity. That's why Reddit is, and always has been, a distinct and direct destination. People seek out Reddit because we meet a universal need they simply can't get anywhere else online. Our work now is about doubling down on what makes Reddit Reddit and making Reddit more of a daily habit.

We come into that work with clear advantages and revenue momentum in the business. And you can see that in the exceptional commercial results we delivered in the third quarter. We generated 53% revenue growth, something few companies are doing, and it's even more significant when you consider that's on top of nearly 70% revenue growth last year. Those results in Q3 helped us cross $3 billion in revenue over the last 12 months. Our margins, which are already industry-leading, expanded across the board.

Reddit's continued growth at scale is proof of the strength of our business, the demand for our platform, and the value we provide advertisers. And it's that consistent delivery of growth and profitability that earned us a place in the S&P 500 index earlier this year. Earlier this quarter, excuse me. Yet while our business continues to grow significantly, internet search and how people discover things online continues to change rapidly and significantly.

Our search referral traffic was down meaningfully in Q3, with the decline accelerating later in the quarter. The biggest impact was on logged out and web traffic, but some of the impact flows through to logged in and app traffic, since search referral is a common source of re-engagement for users. The company helped to offset the declines by both driving reach, primarily through user marketing, and also by continuing to improve the product. These declines have continued into the early part of Q4. During October, we have seen that search traffic has dropped by more than 1 million referrals on average per week. If this rate of decline continues, current trends would suggest that total DAUQs could fall in Q4 by a low double-digit percentage from our current base of 130 million DAUQs.

However, search referral trends do not determine our relevancy, and they do not define our future. LoggedIn and AppDow are our most valuable users and they are our primary focus. And we grew LoggedIn and AppDow sequentially. Together, these make up the vast majority of engagement and over 80% of the monetization on Reddit. Growing this high-value audience speaks to the strength of Reddit as a destination.

And this is what matters for the long-term health of our platform and our business. So, as we look ahead, our strategy to make Reddit a direct daily habit for more people is simple. Make Reddit awesome, grow community and belonging, and bring in new audiences.

Making Reddit awesome means making it more relevant and easier to navigate, getting to personalization faster, and creating fun new experiences on Reddit. This will both improve retention of new users and deepen engagement of our core users. Our work in ML feeds and app performance is delivering results. The percentage of new users who return the first week after installing the Reddit app is up double digits quarter over quarter and over 50% year over year. Video creation and consumption are both up as are chained video views. We'll continue our work in these areas in the coming quarters and I'm particularly excited about some of the areas we'll be testing to make the core feed experience more consistent and predictable, and to grow some of our new experiences like games and visual podcasts.

To grow community and belonging, we've been making it easier to create, grow, and contribute to communities on Reddit. This quarter, we've continued to grow the number of communities on Reddit and increase the contribution from our users. We added another billion posts and comments to our corpus.

Looking forward, our work will be to make subreddits more distinct, to deepen the sense of belonging by making joining subreddits more intentional and significant, and to make moderation much easier and more consistent by giving moderators AI-powered tools. This approach has helped our own enforcement team reduce the median time to action on violating content from 58 hours to 5 seconds this year. Our current opportunity is to better retain the large cohort of users who try Reddit for the first time every day by executing on the above. We see a large number of unattributed, aka word of mouth, installs every day. We also have a large number of reinstalls, which we can mitigate through things like an improved incognito mode in the app.

And of course, we will continue to convert our still significant number of search-referred users from mobile web to app. Currently, only about 13% of eligible mobile web users are seeing the app conversion prompt. So this has room to scale. While early, so far we have seen that app users that come to Reddit through marketing retain at rates similar to app users that come organically, so we will continue to invest here. Together, these efforts will help us reach more people and convert more first-time users into regular Reddit users. And a key piece of work to retain new audiences is shifting Reddit to a logged-in-only experience. It's a big one for us, and it's a big one for me.

I want to take a minute to outline why we're making this change. Moving to primarily logged in will ensure our users have the best Reddit experience possible and can find the content and communities most relevant to them. It's better for our business because we have more signals for ads targeting, and being logged in leads to higher engagement generally. It also allows us to protect access to Reddit's extremely valuable corpus of data and helps us better adapt to emerging regulations around the world.

In Q4, we'll begin fully testing this in select markets outside the U. S. The results of those tests will inform an optimized version of logged-in-only Reddit globally.

Pretty much all the major ad platforms have gone through this transition, so we are excited and are moving quickly. With the above work, we will make Reddit a fun, fulfilling, direct daily habit for every Internet user. Thank you, and now over to Jen.

Thank you, Steve. Hello, everyone. Q3 was a strong quarter for Reddit. Revenue grew 53% year over year and trailing 12-month revenue across $3 billion. This milestone reflects our ability to grow at scale. That growth is happening as the Internet changes quickly. AI is reshaping how people find information and get things done. At the same time, lived experience continues to increase in value as an essential source for advice and as a knowledge source for AI assistance.

People turn to other people when they need a second opinion from someone who actually bought insurance for the first time or who is navigating mid-40s fitness. And to savor the sense of belonging from people coming together to share fun, hardships, and wins. As synthetic content and automated summaries become more common, Reddit's conversations and communities are an increasingly valuable destination for people and a high-intent audience for advertisers.

These real experiences and perspectives help people make big and small decisions every day, and that's why half of U. S. shoppers say they come to Reddit to verify AI recommendations. We see significant opportunity ahead for our business, and we're making progress, reflected in strong customer retention, growing share of wallets, and more always-on advertiser relationships. These trends give us confidence and redicability to deliver durable, differentiated growth.

Now moving to our results. In Q3, advertising revenue grew 54% year-over-year to $847 million. Growth came from both pricing and impressions, with pricing outpacing impressions as we delivered on our strategy to make every impression more valuable. We saw that translate into results. In Q3, click volume grew over 50% and conversion volume more than tripled year-over-year. We also saw strength across our primary sales channels, including large customers and scaled.

Scaled revenue grew more than 80% year-over-year in Q3, driven by deeper relationships with existing advertisers, higher average spend, and new advertiser acquisition. Mid-market active advertisers grew more than 50% year-over-year with growth across both North America and EMEA. In the mid-market channel, our suite of shopping products is contributing to retail advertiser demand, while our B2B offering is driving demand from mid-market service advertisers.

Revenue growth was broad-based across verticals and regions. Business and finance, pharma, and travel industries were strong, and U. S. ad revenue grew 51% year-over-year, while international ad revenue grew 68% year-over-year. Demand spanned the full funnel, led by lower funnel performance revenue, particularly shopping and app installing objectives, which both grew over 95% year-over-year.

Now I'll discuss our progress against the ad stack. Our investments in the ad stack are helping businesses achieve stronger performance and consistent returns. We're executing against three areas, scaling automation through our ads platform and Reddit Max campaigns, delivering advertiser value across the full funnel, and expanding the Reddit for business ecosystem. So starting with automation, Reddit Max entered public data in Q3, and we expanded access and integrated Max into the onboarding experience for new advertisers.

Max advertiser adoption more than tripled quarter over quarter. We also launched asset groups, which let advertisers manage multiple product lines or creative themes within a single MAX campaign. Improvements to the machine learning models beneath MAX and our ad stack are helping us learn faster and improve performance. In Q3, we improved model training, added more real-time sequencing and session signals, and updated graph-based signals across our ranking models. These improvements contributed to performance gains across the funnel from stronger view-through rates in the upper funnel to lower cost per action in the lower funnel.

Our roadmap of model improvements delivers consistent performance gains for advertisers into ad spend efficiency and higher returns. Now moving to our progress across marketing objectives for advertisers on our platform. Reddit users bring high intent to every interaction, whether engaging with text, images, or video. In the upper funnel, video views was our fastest-growing objective, with revenue more than doubling year-over-year. We brought in our video offerings with a new 15-second engaged video view objective, which entered public beta in Q3.

And this objective helps advertisers optimize for people more likely to engage with longer-form video. Now in the lower funnel, shopping was our fastest-growing objective, and we expanded the product to support up to 20 million products, making it easier for larger and more complex advertisers to run shopping campaigns. People come to Reddit to ask questions, learn from real experiences, and make personal decisions based on the communities they trust. The same is true for people making decisions for their business. More than 20 million business decision makers come to Reddit globally, and 9 in 10 use Reddit in the past year to research business products or services. We enhanced our lead generation capabilities to help businesses turn high intent engagement into measurable leads.

Our in-market audiences targeting tools help B2B advertisers reach people actively researching or considering a purchase, including in the enterprise and business AI and cybersecurity industries. B2B advertisers using these audiences saw an average cost per action improvement of about 7% compared to other first-party targeting options. We're also adding audience and measurement partners and testing CRM integrations helping advertisers connect Reddit campaigns to their sales workflows and assess performance across the funnel.

Next, I'll discuss how we're expanding the Reddit for Business ecosystem. We continue to expand our ecosystem by adding partners and extending our products through existing integrations. In Q3 revenue from our Ads API ecosystem grew more than 45 quarter over quarter We added Innovit and Sky to our advertising and customer management partnerships and began a beta integration with HubSpot We also launched Smartly's Max API integration, the first third-party integration for Max campaign management.

Our Shopify integration also continued to scale following its general availability launch in May. Using Reddit's DPA product and Shopify integration, backpack and accessories company Ethnotech connected its catalog to service the most relevant products to high-intent shoppers. They campaigned over the 4x return on advertising spend and a 40% more efficient CPA, helping Ethnotex scale while keeping the ads relevant to each user.

On measurement, third-party research validates our impact across verticals and categories. Research from a team found that Reddit audiences generated higher lifetime value across CPG, quick-serve restaurant, QSR, and retail categories. Reddit shoppers delivered 17% higher LTV in personal care and beauty, 19% higher value in QSR beverage and snacks, and 11% higher value in retail beauty and personal care.

A Samba meta-analysis of 25 tune-in campaigns found Reddit ads drove an average 18% incremental lift in tune-in across linear and streaming, with exposed households watching 15% more minutes than the competitive benchmark, demonstrating that Reddit drove both more tune-in and deeper viewing.

Lastly, I'll share an update on our consumer marketing efforts. Our marketing strategy is to broaden awareness of Reddit and increase our top of funnel for logged in and app users. To build awareness, we're continuing to evaluate our brand strategy. Our brand campaign, People Are the Best, is showing early promise with gains in Reddit's relevance and strong ad recall. We also brought Reddit communities to life through r slash bodega, our first ever community pop-up in New York City.

The bodega represented 75 Reddit communities and reached hundreds of thousands of people in person and online, driving engagement both at the event and across Reddit communities. For our paid marketing strategy, we are starting to shift focus from reach web campaigns to app campaigns. This aligns with our strategy of potentially trading some reach for higher value engaged users.

It's early, but in our experience so far, our U. S. app install campaigns can retain new users at rates comparable to organic app users. Outside the U. S. , reach-based user marketing is more of a lever given the lower awareness of Reddit's brand. In the quarter, we increased user marketing spend internationally in part to compensate for the lost reach from the declines of search referral traffic. This enabled us to continue to introduce new users to the platform. We will evaluate the effectiveness of that spend over the next few quarters. We're also exploring ways to re-engage logged in and app users to sustain core usage and offset pressure from search referral traffic.

Overall, this was another strong quarter for Reddit. Our results reflect strong execution by our teams and the value Reddit delivers to users and customers. We're well positioned to build on this progress in the fourth quarter and into 2027. Thank you for joining us and for your continued support.

Now I'll turn the call over to Drew.

Thank you, Jen, and good afternoon, everyone. Q3 demonstrated again the strength of Reddit's one-of-one financial model. Simply put, we showcased cash generation, earnings power, and best-in-class margins to scale.

On cash generation, our free cash flow margin reached 41% in Q3, while free cash flow was $363 million, up 98% year-over-year. Reddit's cash and investments topped $3 billion for the first time. On earnings power, Q3 GAAP diluted EPS and adjusted EBITDA both grew over 70% year over year. Year to date, adjusted EBITDA surpassed $1 billion, nearly double a year ago.

And for best in class margins, Reddit shined again. Net income margin was 32%. Adjusted EBITDA margin was 45%. Gross margins were 91.5%. I'll now provide more color on our Q3 results. Q3 revenue was $895 million, up 53% year-over-year. Advertising revenue was $847 million, up 54% year-over-year. And other revenue was $48 million, up 35% year-over-year. U. S. revenues grew 50% and international revenues grew 67%. Average revenue per unique user grew 36% year-over-year to $6.87.

Moving to expenses, we continue to invest in the business at a healthy rate. Total adjusted cost and expenses were $493 million, up 41% year over year, very consistent with our expense growth rate over the last four quarters. We continue to be thoughtful about the balance between growth and investment as revenue grew approximately 1.3 times the rate of total adjusted cost, and our incremental adjusted EBITDA margin was 54%. percent. Gross margin was 91.5 percent, up 50 basis points from last year. Cost of revenue was approximately 76 million, up 44 percent year-over-year, reflecting investments in machine learning, site performance, measurement, and safety. The benefit from incremental revenue and ongoing infrastructure efficiency projects helped us to more than offset these cost increases and maintain gross margins above 90% for the ninth consecutive quarter.

Adjusted operating expenses were $417 million, or 47% of revenue, compared to 51% last year, as we continue to gain operating leverage. Within operating expenses, the two largest investment areas are headcount and consumer marketing, and we continue to evaluate these spends with an ROI mindset. On hiring, the focus remains making the product better, accelerating monetization, and strengthening the quality of our user base.

Total headcount grew approximately 3% sequentially and 12% year-over-year. We continue to see great cost leverage and efficiency gains in the back-of-house areas like G&A. We ended Q3 with the same headcount as we had in G&A two years ago, back in 2024 in the third quarter. In Q3, our total consumer marketing spend was consistent with the prior quarter.

Total spend was mid-single digits on a percentage of revenue basis, consistent with Q2, but the spend mix shifted by category and region. In the U. S. , as Jen noted, we shifted a portion of dollars away from web user marketing into app installs and our brand campaign. To date, domestic web user marketing spend has proven effective at bringing users to Reddit, but low retention rates have hurt ROI. Internationally, we've spent more dollars on user web marketing to grow reach, driving users to the platform where the brand is less well-known, which helped offset the declines in international search referral traffic. We'll continue to monitor both the domestic and international marketing performances, and we'll adjust our spend accordingly.

Turning now to stock-based compensation and dilution, in Q3, stock-based compensation-related taxes were $136 million, or 15% of revenue, down 80 BIPs year-over-year. Total fully diluted shares outstanding were down sequentially, landing at $206.3 million. Year-to-date gross dilution, excluding the impact of buybacks, is 1.2%. So we're tracking well so far against our long-term guide of 1% to 3% annual dilution. After buybacks, year-to-date fully diluted share count is up 0.1%. In Q3, we purchased about $100 million worth of stock at an average price slightly below $150 a share. We have about $660 million remaining on our current buyback authorization. A few more points of interest on Q3. Net income was $283 million, or $1.47 per basic share and $1.40 per diluted share, compared to $163 million, or $0.87 for basic share and $0.80 per diluted share a year ago.

Capital expenditures were $1.2 million, so the business remained capital light. We ended Q3 with $3.03 billion in cash, cash equivalents and marketable securities, which gives flexibility to execute on our three capital priorities where it makes sense, investing in the business, M&A, and share repurchase.

I'd like to share a quick point on taxes. Our Q3 tax expense was approximately $5.8 million with an effective tax rate of about 2%. So book tax expense remains modest. We also continue to maintain our full valuation allowances on U. S. federal and state-deferred tax assets. Reddit has now become GAAP profitable since 2024 in the third quarter. We're updating our internal forecast as part of an ongoing assessment to evaluate whether those full valuation allowances remain appropriate over the near term. Turning now to the outlook, we'll share our internal expectations for revenue and adjusted EBITDA for the fourth quarter of 2026, as well as a few additional considerations. In the fourth quarter of 2026, we estimate revenue in the range of $1 billion to $1.03 billion, representing 38% to 42% year-over-year growth, with a midpoint of approximately 40%.

Adjusted EBITDA in the range of $480 million to $510 million, representing 47% to 56% year-over-year growth, and an adjusted EBITDA margin of approximately 49% at the midpoint.

Additionally, I'd like to provide an update on our user disclosures. As the broader Internet landscape continues to evolve, Reddit continues to iterate and learn on many product changes, including an upcoming test to move the platform to logged-in-only users, which Steve described briefly in his remarks. It follows that we'll continue to report logged-in and logged-out DAUQ by geography as they remain useful for understanding user trends consistent with our historical reporting.

As we move forward, we'll continue to evaluate our user reporting to ensure it reflects how we manage and measure our business. To close my commentary, I'd like to highlight that it was great to see Reddit added to the S&P 500 earlier in the quarter. It's a terrific testimony of the progress and the potential of the brand. It was also great to see Reddit cross an important milepost of $3 billion in a trailing 12-month revenue basis.

We've made a lot of progress since we crossed a billion dollars back in 2024. Our next internal North Star is $5 billion in revenue, which will require strong execution to capitalize on the unique raw materials Reddit has. That concludes my comment.

Let me turn the call over to the operator to open the lineup for questions.

Okay. Thanks for the question, Ben. And so the transition to logged in, the genesis is like every other platform has done this. Now, Reddit's different. We've been accessible logged out for a long time. But now is the right time for a variety of reasons. One, when Reddit was born, it was the same content for everybody. Now Reddit is huge. And so the product works best when people are logged in and can get personalized recommendations for communities and content.

Second, it gives us better information to target ads better. Third, it lets us better protect the Reddit corpus of data. The vast majority of the scraping and stealing of Reddit happens in our logout user base. And finally, it allows us to more easily adapt to emerging regulations around the world. Now, there will be trade-offs here. So we will likely be trading reach for engagement. But when a user logs into Reddit, they engage much more deeply.

Keep in mind that 80% of the monetization of Reddit happens within our app and logged in cohort. And so I think there's a lot of opportunity here. It's the reason why I think many of our peers went through this transition already. So in our test, what we're looking for is to see, you know, which surfaces we put the login walls up on, when we do it. So, for example, we want people to go to Reddit. com and get a taste of Reddit. We want link sharing or post sharing on Reddit to continue to work. So figuring out those nuances is really important. Studying the conversion rate on different surfaces is really important. And looking at how engagement improves on the other side of that conversion is really important.

And so all of these things are complex. And so I think the best way to learn that is just to get to a test as soon as possible. And so we'll be doing that in a few markets outside the U. S. as soon as we can to learn. So then I'll hand over to Jen for the revenue question, which is actually related to this.

Yeah, sure. So, Ben, look, demand is really strong. And obviously we grew really nicely in Q3 and been growing really nicely. You know, a couple of things. 80% of our, over 80% of our monetization sits on the shoulders of logged in and app users because they have, you know, order magnitude, more engagement and frequency than, you know, our search referral logged out users. So that's really our bedrock. And over 60% of our business is performance oriented. So it's really based on business outcomes, right? So you heard that we increased quick volume over 50% year over year. where we tripled conversion volume, that's actually the inventory that we need to grow this performance segment of our business.

And that's driven by ML work, signals work, et cetera. So we feel really good about our headroom here in terms of ARPU. I mean you look at Meta ARPU there a lot of headroom between where we are today and where they are And when you look at the engagement of Reddit users just the raw materials we have in terms of engagement, context, that I think, you know, gives us a lot of confidence that we feel like we see the opportunity because we're still mid-flight in our building. The other thing I'll just say is that, you know, I think that, you know, the CPMs, we grew more by CPMs than by impressions, and, you know, we're a marketplace.

You have to remember, for lower funnel outcomes, you can have CPMs that are triple digits. What people are paying for is that intent and that conversion to the outcome, and we think we have a roadmap that continues to deliver on that for advertisers.

Thanks, Josh. So on the change from Google, our hypothesis is twofold. The biggest one is the AI overviews or AI mode. Both have evolved a lot, and particularly recently, They appear to be expanding them quite aggressively both in the U. S. and outside. So what started as a feature is now the full search experience. And at the minimum, it pushes everyone down the search page.

And then on top of that, the experiences themselves are not traffic drivers. And so these things combined with the rollout just means Google has really shifted in their relationship with the rest of the Internet. There's a second factor, which we believe our machine translated content is also being ranked lower. So this primarily would affect us outside the U. S. What this isn't likely, but we don't have visibility into this, is the sort of algorithm change where I would say, hey, these things come and go. This appears to be really the rollout of AI mode and maybe a change in the machine translation or how they treat that.

Reddit, however, is still a top search term in Google. So this doesn't say anything about the Internet consumer's demand for Reddit. People still want Reddit. It's because Google is not sending them to Reddit the way they used to. Given our strategies to make Reddit a direct destination, this is actually in line with our strategy because Google is teaching people that if you want to come to Reddit, you need to come to Reddit.

I can take the paid marketing question. So, you know, we just started doing app install campaigns mainly in the U. S. , and so it's early in terms of scale. But, you know, what we like is that the retention that we're seeing is equivalent to our organic users, so that's promising. Now, that's still low base, but all the work that we're doing in the core product around fees and notifications and personalization, you know, that should list retention for all the users, hopefully including the return on our app install campaign. So it's early, but we see scale there.

Less known, I'd say, outside of the U. S. , we are happy that our brand work is driving efficiency in app install. So that's good. So a full-funnel approach for us I think will make sense because it will drive efficiency in terms of acquiring those app users. And, you know, I think we're going to start the process of looking at re-engagement campaigns for some of our logged in and app users as well. So early, but so far, the app install shift, I think, has been promising.

Sure. John, thanks for the questions. So for logged in only, part of the purpose of the task is to answer that question you asked. Is there a light version of Reddit? Which is, like, what is the boundary? And so we need to find the right boundary to, you know, provide value to the user, you know, whether they're coming from a shared link or maybe from search themselves or trying out Reddit. And so I think there'll be a ton of nuance and detail there for us to iterate on. And so that there'll be some version of Reddit accessible for those moments before we do that hard prompt.

This is a test, but we are going to make this transition. I think the engagement is important. The, the ads targeting is important. The protecting our corpus is very important. and having a firmer footing to adapt to regulation is also important. So there's a lot of reasons for doing this. And at this point, we're the only platform that doesn't do this. And so Reddit has just evolved so much that I think this just meets the needs of the time.

So on engagement, we're seeing lots of green shoots. So our work on feeds, which has been some of our most important work this year, is improving engagement for new and core users. New user retention is up significantly over the course of this year and sequentially. Posts and comments are up sequentially as well. Our corpus is up to 27 billion posts and comments, a billion of those added in the last quarter.

Time on site has been solid. Where we're seeing mixed results is total sessions are down because of that decline in search referral traffic. But we're growing where it counts, which is engagement from our app and logged in users.

Sure. So thank you for the question. It doesn't change. Anything we mentioned on the call doesn't change our perspective there. We don't have any updates to share, though we're in active discussions. what's most important is that any deal we do needs to advance our long-term strategy and has to be a fair exchange of value. Now, these deals aren't binary, however. There's a bunch of options. So on one end, there's access for training, but then there's also display and use and products. And then on the other end, there's more specific uses of our content. So we're only going to do what makes sense and is in the best interest for Reddit strategically and economically, which does potentially include not doing a deal, but those conversations continue to progress.

Thanks for the questions, Tom. So this is a consequential time for Reddit, and this period does remind me of about 11 years ago when I came back to the company. and we've had a lot of conversations then about what is Reddit and what is Reddit for and what is our place in this ecosystem. And we've been having those conversations at Reddit recently. And so Reddit's mission is to create community and belonging for everyone in the world. And while there's overlap between Reddit and other players in the ecosystem, whether we're talking about social media or AI search, fundamentally Reddit is communities and conversations.

It's a place for people to come together. It's a fun and funny place. And it's with you throughout life's journey. And so, yeah, there's some overlap in utility and search and shopping. But really, Reddit, I think, is a unique product on the Internet that can play a really significant role in people's lives. And that's why our team who chooses to work at Reddit over our peers is here. And so these are the sorts of things that get us really energized.

One thing I'm very excited in the near to midterm are some of the product improvements we're making to kind of realize all of this. So there's some fun stuff we're doing in the core app experience that I think for both new and core users will allow the user to more consistently get to where they're going. They more consistently see this is trending, this is news, these are my favorite subreddits, here's my games, here's some videos.

That sort of work is really exciting because it really, I think, brings to life all of that Reddit has to offer. And I think that's one of the challenges we've faced for a long time is, hey, how do you sell this product in the first session when there's so many things you can do on it? So yes, we're seeing a lot of big evolutions with the Google search ecosystem changes, with this transition to logged in only. But alongside that, we're investing in some areas of the product that I think will be really fun and I think really great for our users.

Okay, Drew, the second question was about monetization and ARPU. Yeah, about ARPU. Look, Tom, I think it's just an extension of the journey we've been talking about before. I think the ARCU potential of Reddit is as good as anybody.

It's just we have a number of advantages, I think, as a platform that really differentiate us. I think it starts with what Jen was talking about, which is outcomes and getting the most, making every impression work hard. And I think that's what we've been really successful at. But then if I think about the raw materials of Reddit, I really think we're advantaged in a couple of ways. and we've been talking about this for a long time. It's just now coming to fruition in terms of those words coming to life. But, look, I think from a differentiation perspective, our consumer is just different.

They're broader. They're more balanced. They're more affluent. They have more purchasing power. It's just a very differentiated consumer. A lot of our consumers aren't on other platforms. It matters, and you're seeing that in our financial results. And then the other piece I'd say, again, with the raw materials, we're just naturally commercial. I mean, so many of the subreddits themselves organize into things like skiing and travel, which monetize themselves. So many of the descriptions and conversations have sort of inherent roots in commercialization. I think, again, the platform has context, right? You're not putting an ad in front of a video that doesn't make any sense. You understand and really have kind of the raw materials to be successful there.

So I really think at the end of the day, it's about what Jen was talking about, which is outcomes. That's really what we're focused on. But I do think we continue to see sort of the advantages of the platform, which are the raw materials around, you know, a differentiated consumer and a really naturally commercial platform.

Thanks for the question, Ron. So this is what I was starting to get at in my last answer. Now, long-term or medium-term, I think it will be easier to show, not tell. But today, the core Reddit experience is a feed. And it's a feed of posts. And those posts all have different content types. You might be looking at a link, a text, video. The subreddit might be happy or profound, funny or deep. So it's all in one place.

So one of the things that we're working on right now is adding more organization to the feed so that posts for a similar job and a similar content type and a similar mood are grouped together so that you more consistently get what you're looking for when you open the app. So I, you know, and a core user, I might open the app because I want to know what's going on. I might want to have a few laughs. I might be looking for the game or episode thread for the show I watched last night.

I might be in a lean-back mood for videos. I might be in a leaned-in mood for games, things like that. So I think being able to find these things very quickly when you know they're there, that what gives people confidence to open the app as a daily habit because I know what my experience is going to be And so I think if we get something that is a little less grab baggy from where we are today here's a feed of a lot of crazy stuff to something that's more consistent. That's how we can drive that daily habit. That's what converts those wows to dows. And I think this will make the app more easier to understand natively to a new user because we're going to actually just label these things.

Here's trending. Here's news. Here's some games. Here's some memes. Now, we've got to build this thing and test it, and I think there'll be a lot of iteration, but I think really embracing all of the different jobs that the app does intentionally is how we can develop more of this daily habit. So I'm very excited about this because we've been thinking about this for a long time.

So thanks for the questions, Andrew. So on Google, let me start with the second part, like what is the change? So let me tell you what didn't change. The word Reddit is still among the most searched words on Google. So this says that demand for Reddit hasn't changed from the internet consumer. Also, Google is crawling us as hard as ever. So the demand hasn't changed from their point of view either. The reality is the AI mode does not drive traffic. Not for us and not to anybody as far as I know. And so that's just a fundamental shift in how Google works. It used to be a traffic driver. Now it's not. So now that changes the equation for sure.

But it's not that the users want less. It's just that they're getting it. Now on the other side of that, what are the sticky use cases for Reddit? Well, Reddit is the best place to see what's going on. Reddit has the best, I think, conversations about whatever you did last night. What show did you watch? What game did you watch? We've got totally unique content, right, about every hobby, interest, passion, life stage.

And so what I was talking about in my previous answer is just making those experiences much more consistent. So when you open the app, you know what you're going to get. I think this will benefit the core and new users alike. Now, alongside that, our work on feeds is driving results starting now. And so just simply, you know, we've grown by an order of magnitude the amount of signal that goes into our models, the size of our models. We've dramatically reduced the time it takes to train new models, to deploy new models. All of these things have grown significantly in the last quarter, and we've got a whole, let's call it another year of runway there.

So just the feed itself right now is driving more engagement for new and core users. So I think there's short-term work we can continue to do on the feed, and I think a lot of exciting product work that will make these kind of sticky or daily use cases more effective on Reddit.

Okay, so Jen, the second question is brands and pre-training.

Okay. Yeah, so look, the reason to come and advertise on Reddit, and we say this really clearly, is to come for the engaged audience and to get competitive outcomes. to grow your business, right? That's scalable. It's repeatable. It's measured. It delivers more and more ROI. And that is why advertisers come to us and why they're growing their share of wallet for us. It's like that core proposition for reaching the Reddit audience.

I think there's been this, you know, idea of like GEO or, you know, kind of organic, et cetera. And I was just saying, we've been very open about this with our partners. Like we're pretty skeptical of GEO. Reddit itself is pretty inoculated to, like, manipulation, I would say. And, yes, it is good to spend time with the Reddit audience and have more fans and more customers within Reddit by using our scalable marketing platform to get those outcomes because they might talk about you, and, you know, you need customers in order to have that experience. But that's not the primary reason our advertisers come to us. The reason why they work with us is because of reaching that highly engaged audience where they're able to get business outcomes from our marketing platform.

So it's not in our partnerships today. It's not a core piece of what we do with our advertising partners today. I understand from their point of view, it's something broadly that they're thinking about because they're also dealing with changes in the broader search landscape, but it's just not a part of, it's not a centerpiece of what we're doing.

Hi, thanks for the question. So when I think about M&A, there are a couple of possible objectives. What we've done historically has been small to medium-sized teams plus their tech. We've not done a serious acquisition for users, and that's not on our radar right now. The best way for us to grow users is to capture the opportunity that we have right on our doorstep. We have three major channels even today. The first is our unattributed downloads. We see a ton of unattributed downloads every day. So these are people, basically word-of-mouth users, who are interested in trying Reddit.

And so that is why we have been so focused on new user retention. Now, we've really moved the needle here, and I think we have plenty of room to go. But new user retention is up over 50% year on year. So providing those users a better experience.

Second, Reddit has a large number of reinstalls every day. And so we think this is users coming for a particular type of content and then uninstalling Reddit when they're done. And so we think adding an incognito mode, basically a private browsing mode in our app, will help mitigate this effect. And then finally, we've got the conversion from mobile web for the search-referred users. While the search referrals are in decline, there's still a lot of them. So we've been driving that conversion for the last couple of quarters. And as I mentioned in my script, this quarter only showed that conversion prompt to about 13% of the eligible audience there. So there's plenty of room to scale.

So I think before we start thinking about using acquisition to grow users, we need to make our product the most effective way to grow users. Because the opportunities are basically at scale and on our doorstep. and they're very, very large. It's hard to move the needle against the results we'll see through even small improvements to new user retention.

Okay, thanks for the questions. Look, the reason we're doing the test is to learn the answers to these questions. So we know logged-in users engage much more, right? And we've mentioned this a couple times on this call. 80% of our revenue, over 80% of our revenue comes from logged-in users. So growing that base is very, very important.

Making Reddit logged-in only will assuredly grow that base. but what the conversion rate is over time, we just don't know. That's why we have to do the work. And that's why we have to test, like, where's the right spot to draw these boundaries. Each of our peers have had a lot of success doing this, but they all do it in slightly different ways. And I'm sure we will find a way that makes the most sense for Reddit. Will this make Reddit harder to scrape? For sure. That is one of the reasons. It's not impossible, but again, all of our peers have done this for a long time for this reason, and Reddit with its extremely valuable corpus, this change is really important to protect access to that data and make it intentional.

So like I said, we're going to do this, but the effects on the ecosystem we'll have to test. That's why we're doing the test.

Okay, so question one, logged out users. Does it go to zero or close to zero? But I can't tell you. I think we'll always have some amount, Maybe this is a little bit of the second answer. I think we'll always have some amount of traffic from either search referrals. I mean, sharing, we'd love to really grow that. So that's kind of by its nature logged out at first. Front page traffic, right? People curious about Reddit. So we'll always have that component. But I think when we look at the business over the long term or even shorter, we would expect app and logged in and total DAO to probably more or less converge, you know, plus or minus.

some small percent because that's just where the core of our product is and so that's where we're going to be driving people um for ai overviews and traffic look we don't control google we only control Reddit they've made so many changes and i expect there's more to come um you know like like i said ai overviews or ai mode it's just not a traffic driver so you know we're not we're not counting on that we make no assumption about where that goes or doesn't go in the future What's most important is making sure that Reddit is a direct, sticky, daily destination. And that's all the work that we've mentioned on this call. That's what we can control.

Our work there is working so far, and so I feel very good about it. And we'll let the rest of the ecosystem evolve as it will.

Look, I think third quarter was a good one. We grew 53%, but not a lot of companies growing at 53%. And, you know, we still enter the quarter with about 50% of our business booked. And so we're making estimates about what we're going to get and not get in the quarter. I think, as Jen said, in the quarter, the demand was very, very strong. I think there are a couple of unique dynamics within the third quarter, particularly September is very strong. The demand is very concentrated in the third quarter of September. And then if you double-click on September, there were some days that we had that were particularly strong. So there was, you know, some bookings that we weren't able to deliver on a couple of days.

But overall, no, it's a good quarter for us. We're happy with it. The momentum was strong. And as Jen said, from day one to day 90, the demand was very strong in the quarter.

Okay. Thanks, everybody. As always, we appreciate your time, attention, and questions. Until next time. Bye.