Is RDDT a good stock to buy? We came across a bullish thesis on Reddit, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on RDDT. Reddit, Inc.’s share was trading at $134.13 as of March 10th. RDDT’s trailing and forward P/E were 51.19 and 32.89 respectively according to Yahoo Finance.
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Reddit, Inc. operates a digital community in the United States and internationally. RDDT delivered a strong fourth quarter of 2025 that highlighted not only rapid growth but also a significant improvement in the company’s underlying business quality. Revenue reached $726 million, increasing nearly 70% year over year, while operating margin expanded to 32% and net margin to 35%. Free cash flow margin climbed to 36%, indicating that the company’s profitability gains are being supported by structural operating improvements rather than temporary cost reductions.
Gross margins remained above 90% for the sixth consecutive quarter, and operating leverage became increasingly visible as research and development spending declined meaningfully as a percentage of revenue while SG&A expenses stayed controlled despite strong top-line growth. As a result, operating income rose more than threefold year over year, suggesting that Reddit is transitioning from a heavy investment phase into a period where incremental revenue converts into profit at a significantly higher rate. Monetization strength played a larger role than user growth in driving results.
Global DAUq increased 19%, but the more important driver was ARPU expansion, with U.S. ARPU rising more than 50% and global ARPU growing over 40%. Advertising revenue surged 75%, supported by improvements in performance advertising, advertiser adoption, and campaign efficiency rather than simple traffic expansion. While international markets continue to drive user growth, the U.S. remains the core profit engine.
Management’s guidance for the next quarter reinforced this trajectory, with revenue and adjusted EBITDA expectations exceeding market estimates and signaling a structurally lower cost base. Overall, Reddit now appears to be evolving into a highly profitable platform with expanding monetization efficiency and durable margins, strengthening the bullish investment case as the company demonstrates real and scalable earnings power.
Previously, we covered a bullish thesis on Reddit, Inc. (RDDT) by mylizard in December 2024, which highlighted the platform’s untapped monetization potential through higher ad density, restoring Reddit Gold incentives, and addressing bot and repost issues. RDDT’s stock price has depreciated by approximately 19.77% since our coverage. Sergey shares a similar view but emphasizes on improving profitability, operating leverage, and ARPU-driven monetization growth.
Reddit, Inc. is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 82 hedge fund portfolios held RDDT at the end of the fourth quarter which was 80 in the previous quarter. While we acknowledge the risk and potential of RDDT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RDDT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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Disclosure: None.
