管理層發言
Good afternoon. My name is Julianne, and I will be your conference operator today. At this time, I would like to welcome everyone to Reddit's Q2 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Jesse Rose, head of investor relations. You may begin your conference.
Thanks, Julianne. Hi, everyone. Welcome to Reddit's second-quarter 2026 earnings call. Joining me are Steven Huffman, Reddit's Co-Founder and CEO; Jennifer Wong, Reddit's COO; and Andrew Vollero, Reddit's CFO. I would like to remind you that our remarks today will include forward-looking statements, and 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. 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 second quarter letter to shareholders and earnings press release are available on our Investor Relations website and Investor Relations subreddit. And now I will turn the call over to Steven.
Thanks, Jesse. Hi, everyone. Thank you for joining us, and welcome to our earnings call. Q2 reinforced something we believe deeply. As the Internet becomes more automated, the value of authentic human conversation continues to rise. We saw that reflected in both our commercial success and early progress of our product roadmap. We delivered our eighth consecutive quarter of over 60% revenue growth, hit an adjusted EBITDA margin of 43%, and crossed a major milestone we have been chasing: $1 million revenue per employee. These results speak to the strength of Reddit's monetization engine and the differentiated value we provide advertisers. I heard that clearly at Cannes last month. We met with many of our customers. Across the board, brands told me they believe in Reddit's distinct ability to connect them with highly engaged, highly intentional audiences. More than that, they are rooting for us to win. Reddit works differently from other platforms, and that is important to advertisers and people alike. As the Internet becomes flooded with synthetic content, people are craving real human perspective. We are the antidote to an automated web. AI compresses the Internet into summaries. Reddit delivers the opposite: deep discussions, passionate debates, and firsthand experiences. People do not want a summary of Reddit. They want Reddit. As AI makes information more abundant, the challenge is no longer finding content; it is finding context, personal opinion, and firsthand accounts. Everything online feels flat, polished, generated, or sponsored. Consumers are overwhelmed and increasingly skeptical. We have never had more information, and we have never trusted it less. That is why decision-making is shifting from single authorities to groups of real people who have nothing to gain from you purchasing a product. And it is not just purchase decisions: it is health, careers, travel—everything. Our top priority remains growing our daily active user base by improving the experience for new users so they come back more frequently. Everyone belongs on Reddit because everyone has content, and Reddit has content for everyone. We already have a massive base of weekly users, and our focus is on converting them into dailies. Our product work is improving engagement in key areas. Updated feed models are increasing contribution rates and session frequency, and we are successfully driving more web users to our app where they are far more engaged. We have made it easier to post on Reddit and to find the right community to post in. We have also broadened the product in ways that support growth and engagement. Video and comments help expand our upper funnel, and interactive games on our developer platform drive repeat usage and daily habit. On a weekly basis, Reddit now reaches over 500 million people, including more than 130 million daily. In Q2, we improved our user mix and brought more high-quality users to Reddit across the app and site. New app user retention, an area we have discussed frequently, was up 50% year-over-year on a relative basis this quarter. This is coming from a small base, and we have a lot of work ahead of us, but it is an important sign that we are moving in the right direction. These product efforts, paired with consumer marketing, helped drive daily active users and offset headwinds in users coming from search. Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter. But the bigger picture is unchanged: the commercial business is strong, our revenue growth is differentiated, and we have much to be encouraged by on the product side. While our visibility into referral traffic remains low, we are not building for drive-by traffic. We are building a daily destination. Our product work is what will get us to our goal of 1 billion daily users globally and 100 million in the US. That work takes time to gain traction, but it is what will deepen engagement, strengthen our monetization flywheel, and drive more durable growth. The Internet is divided between machines and humans. There is room for both, but we know who we are building for. People will always want to hear from other people—real opinions, expertise, stories, and communities where they can ask, learn, argue, and belong. Reddit has continued to grow through every major change on the Internet because the underlying need has not changed. Human connection is existential, and Reddit is the most human place on the Internet. That is why I am so confident in where we are going. Thank you, as always, for being along for the ride with us. Now I will hand it over to Jen.
Thank you, Steven. Hello, everyone. Q2 was another strong quarter for Reddit, reflecting the momentum of our advertising business and the differentiation of our platform. Reddit's billions of conversations across hundreds of thousands of communities give advertisers a unique way to reach high-intent audiences and drive measurable, consistent returns. In the age of AI, authentic human conversations have become more distinctly helpful, desired, and valuable. We brought this message to life with the launch of our brand campaign, People Are the Best. The campaign celebrates the people who come to Reddit every day for real perspectives, recommendations, and advice, and the communities that help keep the Internet human. Our research continues to show that no matter where the consumer journey begins, Reddit helps influence purchase decisions and accelerate outcomes. This message resonated at Cannes where we met more than 1,000 customers and partners. Helping people access human perspective is central to our mission and strategy to reach 1 billion daily users and to help advertisers connect with more audiences. Now moving to our results. In Q2, total revenue grew 61% year-over-year to $805 million and advertising revenue grew 64% to $762 million, reflecting broad-based strength across the business. Revenue growth was driven by both pricing and impressions, demonstrating the increasing value we deliver to advertisers. Reddit's content and communities combine search-like intent with the depth and breadth of social, creating a distinct and valuable audience for advertisers to reach and drive results. In Q2, we turned this intent into outcomes with conversion volume growing over 100% and click volume growing over 30% year-over-year. Mid- and lower-funnel performance contributed meaningfully, with revenue from dynamic product ads and app installs each more than doubling year-over-year. We saw strength across our sales channels, including large customers and our scale channel. Our scale channel revenue, which includes mid-market and SMBs, doubled year-over-year. We also saw strength across industry verticals, particularly retail and travel, while active advertisers grew over 70% year-over-year. Now I will discuss our progress across the ad stack. Our strategy is to make businesses of all sizes successful on Reddit by delivering market-competitive outcomes across objectives, and our ongoing investments are measurable and delivering returns. We are executing against three areas: scaling automation through our ads platform Reddit Max, delivering advertiser value across the full funnel, and expanding the Reddit for Business ecosystem. Starting with automation, Reddit Max launched a private beta earlier this year and we are seeing strong adoption and performance for mid- and lower-funnel advertisers. The number of advertisers using Max grew over 60% from Q1, while Max revenue grew over 150% during the same period. We continue to add capabilities to the Max suite. In Q2, we added the app install objective to Max campaigns and launched tailored creatives, which use AI to identify relevant communities and audiences, then design variants on advertiser creative to improve ad relevance and performance. Max campaigns are proving to drive better performance for advertisers and drive high-LTV customers. For example, Lenovo achieved 40% higher purchase value with Max than with a standard campaign, demonstrating how AI-driven optimization can turn high-intent users into high-value customers. Looking ahead, we plan to expand Max to a broader range of advertisers and make it the primary onboarding experience for SMBs. We also plan to introduce new features that simplify activation and continue enhancing our models to drive stronger performance. Now moving to our progress across marketing objectives. With more than half a billion weekly users, Reddit delivers strong outcomes for brand advertisers in the upper funnel. Video views was our fastest-growing upper-funnel objective, more than doubling revenue year-over-year. Our six-second engaged video views goal, which became generally available in January, helps video-first advertisers optimize for longer, more meaningful views. In testing, the objective delivered over 130% lift in six-second view-through rate, over 70% increase in video completion rate, and an 80% reduction in cost per six-second video view with auto-bidding. Video is a growing user and ad content format on Reddit, and an area of continued investment across the consumer and monetization roadmaps. We recently launched video and comments, and with investments in our interactive and AMA ad format, we see an opportunity to offer advertisers more distinctive creative experiences that help them build brand awareness and connect with their customers in a unique way on Reddit. In the lower funnel, shopping and app install objectives are delivering measurable growth and outcomes for advertisers. Max campaigns for app ads entered beta with tests showing an average 15% reduction in cost per action and a 28% increase in results volume. Using Max campaigns on Reddit, online pharmacy DocMorris achieved a 20% lower cost per install and scaled spend after seeing a cost per purchase that outperformed benchmarks by over 70%. Shopping on Reddit continues to be an exciting opportunity. Building on our dynamic product ads roadmap, we launched an alpha test of shopping listing ads. This multi-advertiser product carousel matches product catalogs to high-intent shopping conversations, which are growing 40% year-over-year on Reddit. The format expands our performance offering beyond single-advertiser catalog ads, and it is designed around the way people compare products and make purchase decisions on Reddit. Now turning to measurement. We made important investments in our first-party tools while third-party research further validated Reddit's impact and strengthened our position within the broader ad measurement ecosystem. In Q2, we launched dual attribution in beta, giving app install objective advertisers better visibility into Reddit's role throughout the consumer journey beyond what standard last-touch models may capture. With dual attribution, we combine our first-party attribution signals with existing mobile measurement partner signals to improve our ML models, campaign optimization, and advertiser outcomes. Third-party research is validating our impact across categories and geographies. Research from Attain and Circana found that Reddit delivered 1.5x higher return on ad spend for CPG advertisers than other social platforms on average across the U.S. and Western Europe. The research also showed that Reddit shoppers generated higher lifetime value across categories including food, beverage, and personal care. In another study, TransUnion identified Reddit as the most efficient paid social channel in EMEA for retail advertisers, driving an average 7x higher return on ad spend with 13% of Reddit's impact also lifting other marketing channels. Lastly, I will discuss how we are expanding the Reddit for Business ecosystem. Building more always-on relationships and making it easier for advertisers to scale their spend on Reddit through our ads API and credit lines. Ads API revenue grew over 40% from Q1, and more than half of our revenue comes from credit-line relationships. Our Shopify integration became generally available in May. More than 500 accounts are now integrated with strong activation rates and average revenue per advertiser. We now plan to focus on improving the Shopify product experience, acquiring merchants, and increasing dynamic product ads adoption among integrated clients. Overall, this was another strong quarter for Reddit. Our commercial momentum reflects both strong execution and the differentiated value of the Reddit ecosystem, which is helping our partners generate consistent and durable outcomes. Thank you for joining us and for your continued support. Now I will turn the call over to Drew.
Thank you, Jennifer, and good afternoon, everyone. The financial headline from a strong Q2 is that Reddit's consistent revenue growth continues to fuel compounding growth in cash flow and profitability. Specifically, Reddit grew more than 60% for the eighth consecutive quarter, while operating cash flow, adjusted EBITDA, net income, and GAAP EPS all more than doubled in the quarter year-over-year. It is not often most key profit and cash flow metrics double year-over-year. These results speak to the fact we continue to maintain a healthy balance between growth and profitability. Q2 was our fifth consecutive quarter where our revenue growth rate plus our adjusted EBITDA margin was over 100%. And we are converting that strong growth and margin into cash. It was great to see that we crossed $1 billion of operating cash flow on a trailing 12-month basis for the first time. I will now provide more color on our Q2 results. Q2 revenues of $805 million grew 61% year-over-year, driven by ad revenue of $762 million, which grew 64% year-over-year. Other revenue reached $43 million, up 24% year-over-year. U.S. revenues were up 56% and international revenues were up 84%. Average revenue per unique user grew 36% year-over-year to $6.18. Moving to expenses. Total adjusted costs and expenses, which include both adjusted cost of revenue and adjusted OpEx, were $462 million, up 39% year-over-year. That is very consistent with the 41% rate of cost growth we have seen over the last four quarters. Gross margin was 91.3%, up 50 basis points versus last year. We saw margin tailwinds from incremental revenues and hosting efficiency programs, offsetting the increased use of compute, including higher AI inference usage. In the quarter, cost of revenue was $70 million, up 53% year-over-year, which includes thoughtful investments we are making in such areas as machine learning, site performance and safety, and ad targeting. Operating expenses remain the far larger piece of our adjusted cost base; it is more than 80%. In Q2, we saw two positive takeaways. First, adjusted OpEx was $392 million, 49% of revenue compared to 57% last year, so we continue to get cost leverage. Second, as Steven mentioned, we crossed $1 million of revenue per headcount on an LTM basis for the first time. This was an important North Star we set at our IPO, and a positive signal of an increasingly efficient, more effective team here at Reddit. On hiring, we added about 100 people in Q2. We evaluate resource needs with an ROI mindset, focusing on clear opportunities to improve the consumer product, the ad stack, and coverage of advertiser accounts. We view marketing spending as an important enabler to reach our bold North Star goals of 100 million US users and 1 billion worldwide DAUs. In the quarter, overall paid marketing results were mixed. We did see some encouraging signals with our newly launched brand campaign called People Are the Best, but user acquisition spending needs stronger attention to improve returns. We will continue to evaluate the mix of our spend moving forward. Overall, in Q2, total marketing spend was slightly higher sequentially on a percentage of revenue basis across both paid and brand marketing. Finishing up on cost, stock-based compensation and related taxes were $107 million or 13% of revenue, well in line with benchmarks. SBC was sequentially higher, primarily driven by the timing of our annual grant, which happened in Q2. Even with that timing impact, dilution remains manageable. Total fully diluted shares outstanding were 207 million, up 0.3% sequentially and up 0.2% year-over-year on a net basis considering share repurchases, which became a more meaningful tool this quarter. We repurchased about $235 million worth of stock, about 1.5 million shares at an average price of around $157. We have about $760 million left on our current authorization. Sequential dilution was up 0.3% on a net basis and 1% on a gross basis excluding the impact of share repurchases. A couple more financial points of interest. First, income taxes were slightly higher in Q2 than the prior year, but the effective tax rate remains modest. Net income was $253 million, $1.31 per basic share and $1.25 per diluted share, multiple times the $0.48 and $0.45, respectively, from a year ago. Operating cash flow doubled from $111 million last year to $262 million this year, while CapEx was $1 million and less than 0.2% of revenue, so still very light. We ended Q2 with $2.8 billion in cash, cash equivalents and marketable securities, up over $700 million from a year ago and slightly higher sequentially as cash generated from operations was mostly offset by cash used for repurchases. So now turning to the outlook, we will share our internal thoughts on revenue and adjusted EBITDA for the third quarter. Then I will cover a few additional items for the back half of the year. In the third quarter of 2026, we estimate revenue in the range of $860 million to $870 million, representing 47% to 49% year-over-year revenue growth with a midpoint of about 48%. Adjusted EBITDA in the range of $385 million to $395 million, representing 63% to 67% year-over-year growth, and an adjusted EBITDA margin of 45% at the midpoint. The Q3 guide reflects continued momentum in the business and also takes into account our current investment plans. I will also share an outlook for stock-based compensation. We are lowering our full-year expense guide for SBC from the high teens as a percentage of revenue to the low-to-mid-teens as a percentage of revenue. To date, we have seen good leverage on this expense. It is less than 13% of revenue to date, down more than 1,000 basis points versus the first half of last year. In Q3, we do expect SBC and related taxes to be between $140 million to $155 million as prior grants at lower share prices vest and were refreshed with grants at higher share prices. We also expect our full year dilution to be at the lower end of our 1% to 3% targeted range. This is before considering any additional factors like buybacks, which would lower the number further, or acquisitions, which could increase that total depending on the scale of the deal and the cash-stock mix. Additionally, as we announced earlier this year, Q2 will be the last quarter we report logged-in and logged-out user metrics. In Q3 2026 disclosures, we will continue to report total US and international daily and weekly active users but will no longer report logged-in and logged-out daily active users. As we move forward, we will continue to assess our user reporting and we will ensure it reflects how we look at and run our business. So to summarize, Reddit continues to scale in a one-of-one way. Most of the major profit and cash flow metrics doubled in Q2. Revenue and monetization continue to grow at a differentiated pace, margins remained strong, CapEx was light, and we began to deploy capital in a more meaningful way. It is particularly encouraging to see the way cash flow is scaling. As I mentioned upfront, on an LTM basis, Reddit's operating cash flow crossed $1 billion. We have liquidity and cash capacity to satisfy our three capital priorities, which are: first, investing in the business; second, opportunistic M&A; and third, share repurchases, while maintaining a high level of profitability. That concludes my comments. Let me turn the call back over to Steven.
Thanks, Drew. Before we turn over to the group for questions, let me take one from the Reddit stock community. The question is: what is a memorable conversation and moment you had at Cannes? Let me give you a couple. The first thing that came to mind was one of our brand ambassadors; I had to clear up that, yes, I work here, and no, I am not 28. The second, more business-focused example: without naming names, I had a couple of meetings with brands that we have wanted as customers for a long time. It is just more of the same trend: more and more folks are really starting to get Reddit and understanding how important it can be to them. That was really encouraging. Overall, I loved the way our team shows up. We did, I think, over 500 meetings, and that represents many of our customers, including large customers. It was really encouraging to see folks appreciate what we are trying to do. Thanks for the question. Okay, Julianne, let's open the line up for questions from the folks there.
分析師問答
Thank you. I would like to remind everyone, in order to ask a question, press star then the number 1 on your telephone. Our first question comes from Tom Champion from Piper Sandler. Please go ahead. Your line is open.
Great. Good afternoon. Very strong quarter commercially. Jennifer, what drove the strength in the ads business this quarter? And then for Steven, as you think about Q2 and early Q3, what do you want investors to understand about the trend in user growth and your ability to drive high-quality users to Reddit? Thank you.
Okay. Thanks, Tom. I will take the first question. I think it was another strong quarter and you see the consistency in our business. Number one, our message is resonating with advertisers broadly. Our influence in the purchase decision journey is clear, and advertisers increasingly realize that their customers are placing higher value on human advice. Reddit is the place for that, and they see how important our environment is. We continue to deliver market-competitive outcomes. Our strategy has been making every impression more valuable. When you look at the volume of conversions growing and clicks growing, what that means for an advertiser is that they are getting more outcomes at equal or better prices. We are becoming more competitive with all the signals, ML work, and optimization we are doing. The other piece that is really kicking in is strong adoption of our tools, making it easier to onboard advertisers. This explains why active advertiser growth is over 70% year-over-year. Easier onboarding helps deliver more efficiency, which retains advertisers and allows them to scale spend. We are also making it easier for advertisers to stay always-on with more credit-line adoption, removing friction across the funnel. Finally, our business is diversifying across many dimensions, which makes it resilient. If you look across verticals, 11 out of 15 verticals grew over 50% year-over-year. Our active advertiser count grew over 70%. Our scale channel, which houses mid-market and SMBs, doubled, and international grew over 80%. Our footprint is getting much more diversified, which makes our business resilient and flexible.
Second question, Tom, thanks, about users. As we said last quarter, our goal is to achieve 1 billion daily users globally and 100 million in the US. There is no change there. Reddit is a destination, and in the US we have nearly 200 million users coming every week. We primarily grow through our product work, and that is how we drive daily direct users, and we are making progress there. We added DAUs in the quarter through product work, although that was offset by a decline in search referrals. First, on the product: we improved new app user retention, which is one of our most important metrics and priorities. It was up 50% year-over-year on a relative basis. We grew our reach and crossed half a billion weeklies; US and international weeklies both grew sequentially. On the contribution side, we made it easier to find and post in the right community; there are now 26 billion posts and comments on Reddit, with 1 billion added since Q1. Our thriving communities are growing significantly, and we are more effectively converting web users into higher-value app and direct users. We saw success with video and comments, which expand our upper funnel. We did see headwinds in search referrals, particularly late in the quarter, and visibility into referral traffic remains low. We are focused on what we can control: our direct users driven by product efforts, and we believe this work will be transformational. It will take time, but this is how we get to 1 billion global and 100 million US DAUs.
Thank you. Our next question comes from Ronald Josey from Citi. Please go ahead. Your line is open.
Great. Thanks for taking the question. Maybe a quick follow-up to Tom's question. Steve, you mentioned in the letter that growing DAUs is a top priority. I know you just talked about app usage and the quality of the traffic, but talk to us a little bit more around the products that can convert the strong WAU growth to DAUs. Particularly, I wanted to hear more about the focus on the feed. And there have been a lot of articles and reports about the data licensing partnerships that you currently have. Any updates on strategy as you approach renewals next year? Thank you.
Sure. Thanks, Ronald. On users, focused on WAUs to DAUs is about increasing frequency. We drive that primarily by making Reddit more sticky, and improvements to our feed over the short, medium, and long term will improve that frequency. There is a lot of headroom. To be frank, our feed technology is behind state-of-the-art, which gives us a lot of room to catch up. I am particularly encouraged by the talent we have brought into Reddit over the last quarter to help build the next generation of feeds. But all the smaller improvements matter as well: we did hundreds of experiments in the last quarter and many of them worked on their path to GA. Chipping away at retention and quality drives growth—this includes onboarding, posting, and performance across the app. We are starting to feel momentum. We have also been converting our large top-of-funnel web user base into mobile app users, driving more downloads. Those users often retain well and do even better in the app. So we are seeing progress across the board. On data licensing, there is no change in strategy. Reddit's content is in demand and it is not commodity content—people seek it out intentionally and many come directly to Reddit. Our relationships are multifaceted: Reddit is used for training, post-training to teach models how to talk, for grounding, and as a search index. There are many layers and dimensions for how this can work. These deals are not binary; they have to make sense for Reddit, and there are many ways for the value to return to Reddit. Our goal is to maximize the value returned to Reddit.
Our next question comes from Richard Greenfield from LightShed Partners. Please go ahead. Your line is open.
Steven, I do not want to belabor this point, but your stock is down sharply because there is a sense from investors that you have a user problem, especially in the US. Users have only slightly ticked down despite all the investments you have made over the last year. I certainly hear you on the weekly improvement, but people are looking at the daily numbers and saying that logged-out traffic is going to be under pressure because as search shifts to AI, you will not get referrals. It is going to be harder to get people to go from logged out to logged in. That is symptomatic of what you are seeing and it is impacting your stock. You and the leadership seem confident. What gives you so much confidence that you will grow to 100 million logged-in users in the US and 1 billion globally versus the slight tick down this quarter? And a follow-up on licensing: do you see any world where you are not licensing data to large AI companies next year?
Thanks, Rich. Let me start with the second part first. There is a wide range of outcomes on licensing and we will look at every aspect to maximize value to Reddit. Our relationship with large tech companies predates formal data licensing agreements. Our content has been used in search results and now in AI overviews alongside licensing arrangements. We have seen an expansion in how Reddit's content is used by different partners. I do not view this as a binary outcome; these are independent decisions—training, blue links, AI overviews, and other use cases are separate. We will make sure we maximize value for Reddit. On user growth confidence: we are confident because our product work is working. Reddit is communities and conversation, and communities are universal. We have content for everyone in the US; it is a matter of revealing that. Improving new user retention in the app significantly in a quarter is something we are proud of, and that kind of improvement in retention drives growth. External search is volatile, particularly logged-out web, and that is not where our business lives. We will get as much value from that traffic as we can, and we are driving conversions from web to app more effectively. Long-term, we remain confident in reaching our milestones, but the work takes time and we have more to do in product. Driving direct growth is in our control and we are seeing progress. There are more buyers of Reddit's data beyond just the largest companies; it is an expanding marketplace with many opportunities.
Our next question comes from Mark Mahaney from Evercore. Please go ahead. Your line is open.
Two questions, please. You talked about headwinds in search referrals late in the quarter. Can you put some context around this? Is this something that pops up from time to time, and were the headwinds greater than what you normally see or less? Any interpretation as to what caused those referrals? And then on licensing, do you have any expectations as to when we will get resolution on licensing—by the end of this year, halfway through next year? Anything like that? Thank you very much.
Thanks, Mark. On the traffic, the search ecosystem continues to evolve. We have seen changes like this before; this is not our first rodeo. Specifically, we saw a decline in our machine-translated content, which contributed to volatility on the international side. Machine translation remains a useful strategy within our app for new users, so it affects the availability of content to show them. With the evolution towards AI overviews, 10 blue links drove tremendous value historically, but AI overviews have yet to make a similar level of positive impact across the broader landscape. Our visibility on search continues to be low, and we expect volatility to continue. We are focused on making Reddit a destination and driving more direct app traffic.
Our next question comes from Justin Post from Bank of America. Please go ahead. Your line is open.
Great. Thanks. I will try a different topic. Jennifer, you did over $20 in ARPU in the US in the first half, approaching $50 for the year. How do you think about where you are with ad loads, auction density, and advertiser ROIs? Is there still room to grow significantly from here on your user base? And then one for Drew: how are you measuring the returns on your marketing spend? Thank you.
Happy to take that. I think we still have a lot of headroom. When you look at our roadmap, there are many ways to deliver additional value for advertising partners—more outcomes at more competitive prices. We are a marketplace, which gives us flexibility for demand to meet supply. The headroom will be driven by outcomes across the funnel. The six-second guaranteed video view is particularly valuable and has been a strong-performing product. We intend to continue to invest in that format. The volume of conversions, app installs, and leads is an area where we will continue to work. I feel good about our ability to keep making every impression more valuable, and as long as we do that, ARPU should continue to grow.
Justin, the primary metric we use to evaluate marketing spend is a straightforward cash P&L-based model: acquisition cost of a user, the retention of that user, and monetization of that user netted over a relatively short time frame. It is a consistent look across the industry and gives a real straight value. Occasionally, we look at balance sheet value or long-term user value, but mostly we focus on an ROI-based quick payback model in the short term. That is how we think about it.
Our next question comes from John Colantuoni from Jefferies. Please go ahead. Your line is open.
Great. Thanks for the questions. I wanted to come back to engagement. As you continue driving engagement, how do you see that impacting the experience for users on the home page versus in subreddits? Could the feed look more like some other social platforms that marry machine learning and video content? And second, on Reddit Answers and search: any update on engagement trends within Search and where you are in launching a generally available advertising offering on that surface? Thanks.
I will take the first two and then Jen can comment on ads on search. In terms of engagement distribution, even today the primary surface is the home feed versus subreddits. This is why improving the feed is essential: it does the heavy lifting of juggling a user's subreddits and is a primary driver of subreddit discovery. I expect it to continue to do much of the heavy lifting. We are working on how to show video in the home feed, which has been on our minds as we have more video content on Reddit. Two aspects matter: making video work in a mixed-media feed—video, text, images—and the flows between feed, theater mode, and the comment page; there is a lot of opportunity to improve there. We are also working on a video Reddit experience that lets users listen to posts or background-listen. We see off-platform formats where people read Reddit content as audio or podcasts; an audio/spoken version could be engaging. We are testing many things later this year. On Answers and search, we are making steady progress. The search bar is now universal within the app. We grew both searchers and searches in the quarter. For many queries, Reddit is now the best platform for searching Reddit. Any query where you want multiple perspectives—what should I watch, what do people think, what should I buy—Reddit provides strong answers. I am encouraged by progress and we are starting to look towards ads on that surface.
Search is tightly connected to shopping experiences. The search page can be enriched with richer media modules, including product visuals from catalogs when people are searching or discussing specific products. We have started tests in electronics and consumer electronics and have expanded categories. That enriches the core search experience and should increase engagement. The agentic Ask function on Reddit search is now a strong way to search Reddit. When you have product matches, ads are a natural extension: our shopping listing ads module can show multiple retailers and brands in one module, which is a great ad format for a search page. We have the capability and are tracking adoption as the page settles; there is an advertising opportunity there and we have much of the infrastructure queued up.
Our next question comes from Josh Beck from Raymond James. Please go ahead.
Thanks for taking the question. A multi-pronged product question: new app user retention was highlighted as early success—up 50% year-over-year. What specifically drove that, and is that part of the confidence in product work going forward? And on the feed models, can you give any overview on the drivers—retrieval, ranking, serving, refresh, and so on—what specific areas you are focusing on within the feed improvement? Thank you.
Sure. New app user retention up 50% on a relative basis is a significant move and one of our most important metrics. It is our best measurement of product quality—do users open Reddit and then want to come back? Several factors drove the improvement. One is conversion: taking frequent web users and converting them into app users, where they become even better users. Second, improvements within the app: onboarding is much improved, better connecting users to their homes on Reddit. Operational work around login, account recovery, preserving logins after reinstalls—these things add up and have pushed the number higher. Absolute new user retention still has room for improvement; Reddit can be a hard product to get, so making it easier for new users directly grows our base. That mix shift is what we want and we are starting to see momentum. On the feed, there is a lot to cover. Broadly, our current models are smaller than state-of-the-art, so we can scale up the model size. Our models update slower—on the order of days versus hours or minutes—and the amount of user activity we incorporate into models is limited, currently using a small portion of our activity where it could be much higher. The candidate set is another constraint: currently posts eligible for recommendation are limited to a week, but much Reddit content is timeless and relevant over long periods. We can dramatically improve candidate selection, model size, model speed, and the signals from users. Across many dimensions there are order-of-magnitude improvement opportunities. I expect to do that work over the next year and to see positive results because we are starting from a lower base.
Our next question comes from Andrew Boone from Citizens. Please go ahead. Your line is open.
Thanks so much for taking the questions. I wanted to ask about SMBs. You have Shopify coming on board and Max is doing well. Can you unpack the success you are seeing with SMBs and what to think about the back half of the year for that group? And Steven, going back to engagement: many scaled platforms have large creator ecosystems as they reach a billion users. Do you need to do anything different in terms of content to reach scale, or do you have what you need today? Thanks so much.
I will take SMB. This segment has been growing nicely, but there are still thousands of SMBs globally not yet on our platform. We continue to acquire into this channel and Shopify is a partnership that enables that. We will do joint marketing efforts to accelerate acquisition now that we can sync catalogs and have CAPI integrated into Shopify automatically for Shopify merchants. We will ramp up co-marketing efforts. Second, onboarding SMBs today is not optimized for Max. We are doing foundational work on the right entry point for SMBs to remove friction, tailor to their needs, and allow them to onboard and join Max faster. That work is ahead of us and will be important for smoother acquisition and faster ramp. SMBs also benefit from horizontal work making objectives more efficient. I feel good about momentum in our SMB business, but more tailored product work for this customer set is coming.
On the creator ecosystem, we made a lot of progress this quarter. Posts per logged-in DAU and comments per logged-in DAU, both globally and in the US, are up, as are thriving communities. We launched a new post composer on mobile and web, it is easier to post; a new comment composer; we are better directing users to subreddits where they will be successful; and we are improving community recommendations. We are also working on post success: new users often have posts removed because of account age and other legacy rules that have not aged well. Using LLM-assisted moderation, we can help welcome prospective great users while keeping spammers and bad behaviors out. Video and comments are a new feature already accounting for more than 10% of our video posts, and we are seeing engagement there. I think our creator ecosystem will look different than other platforms. Social media platforms are often for the 1% of creators; Reddit is for everybody else. Our view is that everyone has something interesting to say—even if not a professional creator. Everyone has a question, a need, or a bit of advice. Making Reddit easier to post to and increasing post success rate for everyone is the name of the game, and we made nice progress this quarter.
Our next question comes from Benjamin Black from Deutsche Bank. Please go ahead. Your line is open.
Great. Thank you for taking my questions. A follow-up on marketing spend: given the ARPU you are generating, the ROI on that spend should be attractive. Why not spend more? What are you seeing in terms of the retention of users you are bringing through paid channels, and what can you do to improve it? And Drew, incremental margins have remained exceptionally strong. As the company continues to scale, where do you see the largest remaining opportunity for operating leverage over the next few years? Thank you.
Let me take that. On marketing, we think marketing is important to reach our goals and we want to continue user acquisition spending. We use a pretty straightforward ROI model. The key unlock is better user retention. As Steve said, we were up 50% this quarter, which speaks to product work, but there is more to do. On a relative basis, our retention lags some others in the space, so we will continue to improve it. We also launched the People Are the Best brand campaign this quarter which had positive impact. Balancing user acquisition with brand spending may put us in a better place. We are committed to marketing spend and may consider more brand investment. The real unlocker for more UA spending is better retention—it's that simple. Incremental margins have been in the high-50s to low-60s for some time. We do not manage for incremental margins alone; we look at individual ROI on investments. Incremental flow-through is powerful: particularly on gross margin, revenues can flow through at high rates. We make investments that make sense. We have invested heavily in the ad-tech stack and in our sales team, which is evident in our monetization and consistent growth. We are also investing in machine learning talent and upgrading our growth team. These are investments we make because they are the right priorities. The long-term margin goal is 50%, and much of that will come from leverage off incremental revenues. There are not huge pockets of costs we are targeting for cuts; most leverage comes from revenue growth.
Julianne, I think we have time for one last question. Our last question today will come from Jason Helfstein from Oppenheimer. Please go ahead. Your line is open.
Thanks for squeezing me in. One question: you emphasize the importance of high-quality users—app users and logged-in users. Is the takeaway that some referral traffic users are worth much less than direct app users, so the street's focus on a small sequential DAU decline might be masking the fact you are offsetting that with higher-quality users? How should we think about the value difference, and will you share additional metrics to help us understand that? Thank you.
Thanks, Jason. You have it right. Direct users—the app, logged-in users—are worth multiples more than search referral traffic. We are not building Reddit for drive-by traffic; we are building Reddit for direct usage, and that is where our business lives. You can see it in our ads performance: despite search volatility, our revenue growth has been strong and consistent because our business is driven by direct repeat users and growing that base. Through conversion and retention efforts, we made nice progress this quarter. That is the work we can control regardless of broader search dynamics. Thank you everyone, we appreciate you joining, and we look forward to speaking again soon.
This concludes Reddit's Q2 2026 earnings call. You may now disconnect.