Reddit’s ad revenue climbs sharply in Q4 as platform scales performance and pricing

Reddit closed 2025 with a sharp acceleration in advertising revenue, positioning ads as the primary driver of the platform’s financial growth even as investor sentiment around its stock remained volatile. In the fourth quarter, Reddit reported $690 million in ad revenue, marking a 75% year-over-year increase and accounting for the vast majority of its $726 million total quarterly revenue.

For the full year, Reddit’s ad business generated $2.1 billion, surpassing the $2 billion threshold for the first time and growing 74% year over year. Advertising now represents the core of Reddit’s revenue mix, significantly outpacing the platform’s smaller “other revenue” segment, which includes data licensing and content partnerships.

Reddit attributed its Q4 ad revenue growth primarily to increased impression volume, supported by rising user engagement. Daily active uniques reached 121.4 million, up 19% year over year, while weekly active users grew to 471 million. According to the company, higher engagement directly translated into more ad inventory, which was a key factor behind revenue expansion.

At the same time, Reddit confirmed that pricing increases also contributed to ad revenue growth. While the company did not disclose the precise balance between impression growth and pricing, executives pointed to improved advertiser return on ad spend (ROAS) as the justification for higher rates. These gains were supported by expanded use of Reddit’s conversion API and AI-driven campaign optimization tools.

Early tests of Reddit’s automated campaign solution, Reddit Max, showed measurable performance improvements, including lower cost per acquisition and higher conversion volumes. The company said revenue tied to lower-funnel objectives such as app installs and purchase conversions doubled year over year, while revenue associated with conversion API coverage tripled each quarter in 2025.

Historically, Reddit has positioned itself as a performance-oriented platform, attracting budgets from direct-to-consumer and small- to mid-sized advertisers. That focus continued in Q4, with Reddit reporting a 75% year-over-year increase in active advertisers and strong growth from SMB campaigns.

However, company executives indicated that brand-oriented formats are becoming a larger part of the advertising mix. Reddit highlighted increased adoption of interactive ad units, including gamified formats, quizzes, and custom experiences designed to support upper-funnel objectives. Video advertising also expanded, with the platform investing in machine learning systems to drive deeper video consumption and support longer ad formats.

Mid-funnel activity showed similar momentum. Reddit reported that mid-funnel click volume increased 60% in Q4, alongside the rollout of budget optimization tools aimed at improving campaign efficiency beyond pure conversion goals.

While Reddit’s AI-powered search products are not yet monetized through advertising, they are already influencing the ad business indirectly by driving engagement and traffic. Weekly active users of Reddit search grew to 80 million, while the platform’s AI-driven Reddit Answers product expanded from 1 million weekly users in early 2025 to 15 million by year-end.

The company also announced that it will stop reporting logged-in and logged-out users separately beginning in 2026, stating that both groups generate ad impressions with equivalent value. This shift raised questions among some investors, given the traditional premium placed on logged-in audiences for ad targeting, but Reddit maintained that its strategy prioritizes overall engagement growth over login-based personalization.

Despite its advertising momentum, Reddit’s stock declined sharply following its earnings release, falling roughly 38% over the past month. The drop came even as the company posted its strongest revenue results to date, suggesting broader market pressures rather than platform-specific weakness. Comparable social platforms, including Snap and Pinterest, also saw notable share price declines over the same period amid a wider tech-sector downturn.

From an operational standpoint, Reddit’s advertising business remains the platform’s primary growth engine. With Q1 2026 revenue guidance set between $595 million and $605 million, advertising is expected to continue driving the bulk of near-term gains as Reddit scales its AI-driven ad delivery models, pricing strategy, and full-funnel capabilities.