Reddit, Inc. (NYSE:RDDT) and Snap Inc. (NYSE:SNAP) are both selling advertising against an audience that did not exist twenty years ago, and both have been punished this year. Reddit is down roughly a third, Snap about the same.
That is where the symmetry ends. Snap collects far more revenue and loses money. Reddit collects far less and earns a profit margin above 30%.
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Reddit Makes More From Fewer Users Than Snap Does:
Snap’s revenue is roughly $6.35 billion a year against Reddit’s $2.78 billion. On that basis, Snap looks like the larger business, and it is.
But Reddit grew about 67% over the past year while Snap grew about 13%, and Reddit turned its revenue into roughly $871 million of profit while Snap lost money. Snap’s most recent quarter of revenue growth was better, closer to 19%, so the gap is narrowing from a very wide starting point.
The advertising gap explains most of it. On Reddit’s own disclosure, its revenue per user in the United States now runs ahead of Snapchat’s North American figure, though the two companies count users differently. Advertisers appear to like a place where people arrive asking for recommendations.
Reddit also has a revenue line Snap does not. It licenses its archive of human conversation to AI companies, with deals reported at roughly $60 million a year from Google. That is money from a market that did not exist two years ago, though the Google arrangement has been reported as at risk of renegotiation.
DON’T MISS: Reddit (RDDT) May Walk Away From Google’s (GOOGL) $60 Million-a-Year Deal as AI Search Eats Its Traffic
Snap is a Third of the Price for a Reason:
Snap trades near eight times what analysts expect it to earn next year. Reddit trades near twenty-three times. Cheap is not the same as wrong.
Snap holds about $2.66 billion of cash, has a global audience that dwarfs Reddit’s, and is not going out of business. If it simply stops losing money, the shares do not need much growth to work from here.
The problem is that it has been about to stop losing money for a long time. Snap has spent years launching products, most recently a set of smart glasses, while the core advertising business fails to convert scale into profit.
Reddit carries its own risk, and it is the reverse. It depends on search traffic that AI assistants are increasingly intercepting, answering questions without sending anyone to the site. The licensing money that looks like a new revenue stream partly compensates for the traffic those same companies are taking away.
The risk on the other side is not the multiple. Twenty-three times forward earnings is modest for this rate of growth. The risk is that the growth rate is the entire case, and the traffic driving it belongs to somebody else.
Conclusion:
Snap is the cheaper stock and has the larger audience, and at eight times forward earnings a turn to sustained profit would be worth a great deal. However, it has not managed that yet, and the smaller company beside it is growing several times faster, earning a 30% margin and monetizing each American user better. On balance, Reddit is the better buy, provided the search traffic that drives the growth holds up. The number to watch is daily active uniques when Reddit reports in early November. Note that Reddit is dropping its logged-in and logged-out split from this quarter, which removes the clearest view of exactly the traffic AI search would take.
Market Sentiment:
Reddit, Inc. was held by 91 hedge funds with a combined stake value of about $4.3 billion at the end of Q2 2026 in the Insider Monkey database, up from 70 holders in the previous quarter. Snap Inc. was held by 45 hedge funds with a combined stake value of about $0.7 billion, down from 46 holders in the previous quarter.
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This article is originally published at Insider Monkey.
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