Reddit Inc.
10/31/2025 | Press release | Distributed by Public on 10/31/2025 04:02
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2024 included in our Annual Report on Form 10-K (the "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in "Risk Factors" and "Note Regarding Forward-Looking Statements."
Overview of Third Quarter 2025 Results
User Metrics
•Daily Active Uniques ("DAUq") were 116.0 million for the three months ended September 30, 2025, an increase of 19% year over year
•Average revenue per unique ("ARPU") was $5.04 for the three months ended September 30, 2025, an increase of 41% year over year
Financial Results
•Revenue was $584.9 million for the three months ended September 30, 2025, an increase of 68% year over year
•Gross margin was 91.0% for the three months ended September 30, 2025, as compared to 90.1% in the three months ended September 30, 2024
•Operating expenses were $393.9 million for the three months ended September 30, 2025 as compared to $306.9 million in the three months ended September 30, 2024
•Net income was $162.7 million for the three months ended September 30, 2025, as compared to $29.9 million in the three months ended September 30, 2024
•Adjusted EBITDA was $236.0 million for the three months ended September 30, 2025, as compared to $94.1 million in the three months ended September 30, 2024
•Net cash provided by operating activities was $185.2 million for the three months ended September 30, 2025, as compared to $71.6 million in the three months ended September 30, 2024
•Free Cash Flow was $183.1 million for the three months ended September 30, 2025, as compared to $70.3 million in the three months ended September 30, 2024
•Cash, cash equivalents, and marketable securities were $2.2 billion as of September 30, 2025
Key Financial and Operating Metrics
We review a number of metrics, including the key metrics discussed below, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
Trends in User Metrics
Daily Active Unique. We define a daily active unique ("DAUq") as a user whom we can identify with a unique identifier who has visited a page on the Reddit website, www.reddit.com, or opened a Reddit application at least once during a 24-hour period. We calculate average DAUq for a particular period by adding the number of DAUq on each day of that period and dividing that sum by the number of days in that period. DAUq is shown globally and also broken out by the United States and the rest of the world because these markets have different characteristics. Most notably, we are more advanced in engagement and monetization in the United States than in the rest of the world. We measure DAUq because we believe that this metric helps management and investors understand usage of and engagement with our platform. DAUq is the primary metric by which we measure the scale of our active user base.
DAUq includes visits from those who have logged in to a registered account as well as those who have not logged in to-or do not have-a registered account. Visitors that come to Reddit from search engines are generally not logged in and originate from both desktop and mobile web. Currently, monetization of these users is mainly through conversation pages and feed ads. Measuring the number of logged-out visitors is difficult and complex. For example, prior to the first quarter of 2023, a portion of our historical DAUq metric counted views of pages that were hosted using Google's Accelerated Mobile Page ("AMP") framework. The accuracy of counting the DAUq attributable to this AMP traffic relied on the accuracy and completeness of information received from Google, which had not been historically complete and consistent. As such, our historical DAUq metrics are not directly comparable quarter over quarter or year over year. To the extent that our metric includes views of pages hosted on third-party infrastructure, like Google's AMP framework, the accuracy and comparability of our metrics will depend on the accuracy and consistency of the information received from any such third party.
In addition, we monitor logged-in DAUq, which we define as a user whom we can identify with a unique identifier who has visited a page on the Reddit website, www.reddit.com, or opened a Reddit application at least once during a 24-hour period and was logged in to a registered account. We measure logged-in DAUq because these users tend to have higher engagement and spend more time on our platform compared to users who are not logged in to a registered account.
Quarterly Average DAUq
(in millions)
| Total DAUq YoY Growth: | 27% | 37% | 51% | 47% | 39% | 31% | 21% | 19% | ||||||||||||||||||
| Logged-in DAUq YoY Growth: | 21% | 27% | 31% | 27% | 27% | 23% | 17% | 14% | ||||||||||||||||||
| Total DAUq YoY Growth: | 34% | 45% | 59% | 51% | 32% | 21% | 11% | 7% | Total DAUq YoY Growth: | 21% | 30% | 44% | 44% | 46% | 41% | 32% | 31% | |||||||||||||||||||||||||||||||||||||||
| Logged-in DAUq YoY Growth: | 20% | 27% | 32% | 29% | 24% | 19% | 12% | 7% | Logged-in DAUq YoY Growth: | 21% | 28% | 30% | 26% | 29% | 27% | 22% | 19% | |||||||||||||||||||||||||||||||||||||||
We assess both year over year and quarter over quarter growth of DAUq in each period.
In the three months ended September 30, 2025, global DAUq grew 19% compared to the prior year period, driven by 7% growth in DAUq in the United States and 31% growth in DAUq in the rest of world. Global DAUq grew 5% compared to the prior quarter period, driven by 3% growth in DAUq in the United States and 7% growth in DAUq in the rest of world. The growth in global DAUq in the three months ended September 30, 2025 compared to the prior year and prior quarter periods was primarily driven by product initiatives, particularly machine translation, and relatedly, third-party search engine and algorithm changes, as well as marketing.
Year over year and quarter over quarter activity can also fluctuate due to various internal and external factors. During the three months ended December 31, 2023 and 2022, we deployed further advances in our process used to identify and address activity by users and visitors, including web crawlers and scrapers. As we identify automated agents, we remove them from our DAUq count prospectively and do not recalculate DAUq for prior periods if we assess such impact to be immaterial. As we have continued to improve our capabilities to identify suspicious traffic, we have not seen this methodology materially impact trends in DAUq from quarter to quarter.
Weekly Active Unique. We define a weekly active unique ("WAUq") as a user whom we can identify with a unique identifier who has visited a page on the Reddit website, www.reddit.com, or opened a Reddit application at least once during a trailing seven-day period. We calculate average quarterly WAUq for a particular period by adding the number of WAUq on each day of that period and dividing that sum by the number of days in that period. We measure WAUq because we believe that this metric helps management and investors understand the reach of our platform.
During the three months ended December 31, 2023 and 2022, we deployed further advances in our process used to identify and address activity by users and visitors, including web crawlers and scrapers. As we identify automated agents, we remove them from our WAUq count prospectively and do not recalculate WAUq for prior periods if we assess such impact to be immaterial. As we have continued to improve our capabilities to identify suspicious traffic, we have not seen this methodology materially impact trends in WAUq from quarter to quarter.
Quarterly Average WAUq
(in millions)
| WAUq YoY Growth: | 29% | 40% | 57% | 53% | 42% | 31% | 22% | 21% | ||||||||||||||||||
| DAUq/WAUq: | 27% | 27% | 27% | 27% | 27% | 27% | 27% | 26% | ||||||||||||||||||
|
WAUq YoY Growth:
|
39% | 53% | 68% | 58% | 31% | 18% | 8% | 6% |
WAUq YoY Growth:
|
20% | 30% | 48% | 48% | 52% | 44% | 35% | 37% | ||||||||||||||||||||||||||||||||||||
In the three months ended September 30, 2025, global WAUq grew 21% compared to the prior year period, driven by 6% growth in WAUq in the United States and 37% growth in WAUq in the rest of world. In the three months ended September 30, 2025, global WAUq increased 7% compared to the prior quarter period, driven by 4% growth in WAUq in the United States and 9% growth in WAUq in the rest of world. For the three months ended September 30, 2025, the proportion of DAUq to WAUq was 26%.
Trends in Monetization Metrics
We monetize our business primarily through advertising on our mobile applications and website. In the nine months ended September 30, 2025, we recorded revenue of $1.5 billion, as compared to revenue of $0.9 billion for the nine months ended September 30, 2024, representing an increase of 69% compared to the prior year period.
ARPU. We define average revenue per unique ("ARPU") as quarterly revenue in a given geography divided by the average DAUq in that geography. For the purposes of calculating ARPU, advertising revenue in a given geography is based on the geographic location in which advertising impressions are delivered, as this approximates revenue based on user activity, while other revenue in a given geography is based on the billing address of the customer. This differs from the presentation of our revenue by geography in the notes to our consolidated financial statements included elsewhere in the Quarterly Report on Form 10-Q, where both advertising revenue and other revenue are based on the billing address of the customer.
We present ARPU globally and also broken out on a United States and rest of world basis because we currently monetize users in the United States and the rest of the world at different rates. We measure ARPU because we believe that this metric helps our management and investors assess the extent to which we are monetizing our DAUq. Monetization of new users is generally at a lower rate than existing users and as such, ARPU tends to grow at a lower rate than revenue in periods of strong DAUq growth. Additionally, logged-out users typically have lower engagement and spend less time on our platform compared to users who are logged in to a registered account, and therefore, logged-in users generally contribute significantly more to ARPU than logged-out users due to the lower monetization opportunity of logged-out users. Our ARPU reflects the seasonality of our advertising revenue, with the fourth quarter typically being the strongest quarter of each year, especially in the United States, our most developed geography. United States ARPU is higher primarily due to the relative size and maturity of the U.S. digital advertising market, a dynamic we expect will continue for the foreseeable future.
Quarterly ARPU
(in dollars)
| YoY Growth: | (2)% | 8% | 2% | 14% | 23% | 23% | 47% | 41% | ||||||||||||||||||
| QoQ Growth: | 9% | (14)% | 5% | 16% | 18% | (14)% | 25% | 11% | ||||||||||||||||||
| YoY Growth: | (7)% | 3% | (5)% | 12% | 28% | 31% | 59% | 54% |
YoY Growth:
|
3% | 10% | 17% | 16% | 25% | 22% | 40% | 39% | |||||||||||||||||||||||||||||||||||||||
|
QoQ Growth:
|
5% | (13)% | 4% | 19% | 20% | (11)% | 26% | 15% |
QoQ Growth:
|
18% | (18)% | 13% | 6% | 27% | (20)% | 29% | 6% | |||||||||||||||||||||||||||||||||||||||
During the three months ended September 30, 2025, ARPU was $5.04, an increase of 41% compared to $3.58 for the prior year period, United States ARPU was $9.04, compared to $5.88 for the prior year period, and rest of world ARPU was $1.84, compared to $1.32 for the prior year period. The increase in global ARPU compared to the prior year period was due primarily to an increase in advertising revenue driven by an increase in impressions delivered, and to a lesser extent, an increase in pricing. The increase in global ARPU compared to the prior quarter period was due primarily to an increase in advertising revenue driven by an increase in pricing, and to a lesser extent, an increase in impressions delivered.
Non-GAAP Financial Measures
We use certain non-GAAP financial measures to supplement our consolidated financial statements, which are presented in accordance with U.S. GAAP, to evaluate our core operating performance. These non-GAAP financial measures include Adjusted EBITDA and Free Cash Flow. We use these non-GAAP financial measures to facilitate reviews of our operational performance and as a basis for strategic planning. By excluding certain items that are non-recurring or not reflective of the performance of our normal course of business, we believe that Adjusted EBITDA and Free Cash Flow provide meaningful supplemental information regarding our performance. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow investors to supplement their understanding of our financial trends and evaluate our ongoing and future performance in the same manner as management. However, there are a number of limitations related to the
use of non-GAAP financial measures as they reflect the exercise of judgment by our management about which expenses are included or excluded in determining these non-GAAP measures. These non-GAAP measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with U.S. GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.
Adjusted EBITDA
Adjusted EBITDA is defined as net income (loss) excluding interest (income) expense, net, income tax expense (benefit), depreciation and amortization, stock-based compensation expense and related taxes, other (income) expense, net, and certain other non-recurring or non-cash items impacting net income (loss) that we do not consider indicative of our ongoing business performance. Other (income) expense, net consists primarily of realized gains and losses on sales of marketable securities, foreign currency transaction gains and losses, and other income and expense that are not indicative of our core operating performance. We consider the exclusion of certain non-recurring or non-cash items in calculating Adjusted EBITDA to provide a useful measure for investors and others to evaluate our operating results in the same manner as management.
The following table presents a reconciliation of our net income (loss), the most directly comparable financial measure presented in accordance with U.S. GAAP, to Adjusted EBITDA:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Reconciliation of Adjusted EBITDA: | |||||||||||||||||||||||
| Net income (loss) | $ | 162,663 | $ | 29,853 | $ | 278,118 | $ | (555,312) | |||||||||||||||
| Add (deduct): | |||||||||||||||||||||||
| Interest (income) expense, net | (22,305) | (21,155) | (63,775) | (57,543) | |||||||||||||||||||
| Income tax expense (benefit) | (2,086) | (31) | (4,246) | 118 | |||||||||||||||||||
|
Depreciation and amortization(1)
|
3,900 | 3,969 | 11,797 | 11,482 | |||||||||||||||||||
|
Stock-based compensation expense and related taxes(2)
|
93,565 | 83,326 | 296,074 | 745,635 | |||||||||||||||||||
| Other (income) expense, net | 270 | (1,813) | 59 | (703) | |||||||||||||||||||
| Adjusted EBITDA | $ | 236,007 | $ | 94,149 | $ | 518,027 | $ | 143,677 | |||||||||||||||
(1)Includes depreciation and amortization as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Research and development | $ | 2,487 | $ | 2,473 | $ | 7,537 | $ | 6,892 | |||||||||||||||
| Sales and marketing | 1,212 | 1,215 | 3,630 | 3,594 | |||||||||||||||||||
| General and administrative | 201 | 281 | 630 | 996 | |||||||||||||||||||
| Depreciation and amortization | $ | 3,900 | $ | 3,969 | $ | 11,797 | $ | 11,482 | |||||||||||||||
(2)Includes stock-based compensation expense and related taxes as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 212 | $ | 70 | $ | 633 | $ | 389 | |||||||||||||||
| Research and development | 57,670 | 46,022 | 182,486 | 404,445 | |||||||||||||||||||
| Sales and marketing | 12,936 | 8,805 | 38,309 | 79,786 | |||||||||||||||||||
| General and administrative | 22,747 | 28,429 | 74,646 | 261,015 | |||||||||||||||||||
| Stock-based compensation expense and related taxes | $ | 93,565 | $ | 83,326 | $ | 296,074 | $ | 745,635 | |||||||||||||||
Free Cash Flow
Free Cash Flow represents net cash provided by (used in) operating activities less purchases of property and equipment. We believe that Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth. Additionally, we believe that Free Cash Flow is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue generating activities.
The following table presents a reconciliation of net cash provided by (used in) operating activities, the most directly comparable financial measure calculated in accordance with U.S. GAAP, to Free Cash Flow:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Reconciliation of Free Cash Flow: | |||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 185,159 | $ | 71,622 | $ | 424,068 | $ | 132,071 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Purchases of property and equipment | (2,058) | (1,353) | (3,542) | (5,406) | |||||||||||||||||||
| Free Cash Flow | $ | 183,101 | $ | 70,269 | $ | 420,526 | $ | 126,665 | |||||||||||||||
Results of Operations
The following table summarizes our historical consolidated statements of operations data for the periods indicated:
| Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 584,911 | $ | 348,351 | $ | 236,560 | 68 | % | $ | 1,476,899 | $ | 872,498 | $ | 604,401 | 69 | % | |||||||||||||||||||||||||||||||
| Net income (loss) | 162,663 | 29,853 | 132,810 | NM | 278,118 | (555,312) | 833,430 | NM | |||||||||||||||||||||||||||||||||||||||
|
Adjusted EBITDA(1)
|
236,007 | 94,149 | 141,858 | 151 | % | 518,027 | 143,677 | 374,350 | NM | ||||||||||||||||||||||||||||||||||||||
_________________
NM - Not meaningful
(1)See "Non-GAAP Financial Measures-Adjusted EBITDA" for more information and for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
Components of Results of Operations
Revenue
We generate a majority of our revenue through the sale of advertising on our mobile applications and website. We recognize revenue only after transferring control of promised goods or services to customers, which occurs when a user clicks on an ad contracted on a cost per click ("CPC") basis, views an ad contracted on a cost per thousand impressions ("CPM") basis, views a video ad contracted on a cost per view ("CPV") basis, or on a fixed fee basis, based upon ad delivery over the service period, which is typically less than 30 days in duration.
We also generate revenue from content licensing, Reddit Premium subscriptions, and products within our user economy. In our content licensing arrangements, we provide customers with the right to access content from our platform over the contractual period. We recognize content licensing revenue as our content partners consume and benefit from their use of the licensed content, which is generally ratably over the license period. We recognize Reddit Premium subscription revenue ratably over the subscription period, which is generally less than one year. Products within our user economy include Reddit Gold and Collectible Avatars. Revenue from Reddit Gold and Collectible Avatars was immaterial for the periods presented.
Cost of Revenue
Cost of revenue consists primarily of payments to third parties for the cost of hosting and supporting our mobile applications and website. In addition, cost of revenue includes expenses directly associated with the delivery of our advertising and other services, including advertising measurement services and credit card and other transaction processing fees. Cost of revenue also consists of employee-related costs, including salaries, benefits, and stock-based compensation.
Research and Development Expenses
Research and development expenses consist primarily of employee-related costs including salaries, benefits, and stock-based compensation for engineers and other employees engaged in the research, design, and development of new and existing products. Research and development expenses also include professional services and hosting costs associated with internal research and development activities, as well as allocated facilities and other supporting overhead costs.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of employee-related costs including salaries, benefits, and stock-based compensation for employees engaged in sales, sales support, business and brand development, marketing, and customer service functions. Sales commissions are expensed as incurred in sales and marketing expenses as the expected period of benefit is one year or less. Sales and marketing expenses also include costs incurred for advertising, market research, branding, professional services, marketing, and promotional expenditures, as well as allocated facilities and other supporting overhead costs.
General and Administrative Expenses
General and administrative expenses consist primarily of employee-related costs including salaries, benefits, and stock-based compensation for certain executives as well as employees engaged in finance, legal, human resources, information technology, communications, and other administrative teams. General and administrative expenses also include costs incurred for professional services, as well as allocated facilities and other supporting overhead costs.
Other Income (Expense), Net
Other income (expense), net, consists primarily of interest income, interest expense, realized gains and losses on sales of marketable securities, and foreign currency transaction gains and losses.
Income Tax Expense (Benefit)
We are subject to income taxes in the United States and foreign jurisdictions. Our income tax provision represents the income tax expense or benefit associated with our operations based on the tax laws of the jurisdictions in which we operate. The foreign jurisdictions where we operate have different statutory tax rates than the United States. Additionally, certain of our foreign earnings may also be taxable in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to domestic income, use of foreign tax credits, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.
We have a full valuation allowance against our United States deferred tax assets and will continue to maintain it until there is sufficient evidence to support the future utilization of these assets. Given our recent history of generating net income in the U.S., we believe that there is a reasonable possibility that sufficient positive evidence may become available within the next 18 months to allow us to release a significant portion of the U.S. valuation allowance. The reversal would result in a significant income tax benefit in the period when we release it. However, the exact timing and amount of the valuation allowance release are subject to change based on our actual operating results.
Discussion of Results of Operations
The following table sets forth our consolidated statements of operations data for the periods indicated:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Consolidated Statements of Operations Data: | |||||||||||||||||||||||
| Revenue | $ | 584,911 | $ | 348,351 | $ | 1,476,899 | $ | 872,498 | |||||||||||||||
|
Costs and expenses:
|
|||||||||||||||||||||||
| Cost of revenue | 52,509 | 34,633 | 135,498 | 91,750 | |||||||||||||||||||
| Research and development | 196,379 | 166,701 | 584,260 | 746,508 | |||||||||||||||||||
| Sales and marketing | 128,707 | 74,510 | 340,011 | 270,063 | |||||||||||||||||||
| General and administrative | 68,774 | 65,653 | 206,974 | 377,617 | |||||||||||||||||||
| Total costs and expenses | 446,369 | 341,497 | 1,266,743 | 1,485,938 | |||||||||||||||||||
| Income (loss) from operations | 138,542 | 6,854 | 210,156 | (613,440) | |||||||||||||||||||
| Other income (expense), net | 22,035 | 22,968 | 63,716 | 58,246 | |||||||||||||||||||
| Income (loss) before income taxes | 160,577 | 29,822 | 273,872 | (555,194) | |||||||||||||||||||
| Income tax expense (benefit) | (2,086) | (31) | (4,246) | 118 | |||||||||||||||||||
| Net income (loss) | $ | 162,663 | $ | 29,853 | $ | 278,118 | $ | (555,312) | |||||||||||||||
|
Adjusted EBITDA(1)
|
$ | 236,007 | $ | 94,149 | $ | 518,027 | $ | 143,677 | |||||||||||||||
| Net cash provided by (used in) operating activities | $ | 185,159 | $ | 71,622 | $ | 424,068 | $ | 132,071 | |||||||||||||||
|
Free Cash Flow(2)
|
$ | 183,101 | $ | 70,269 | $ | 420,526 | $ | 126,665 | |||||||||||||||
_________________
(1)See "Non-GAAP Financial Measures-Adjusted EBITDA" for more information and for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
(2)See "Non-GAAP Financial Measures-Free Cash Flow" for more information and for a reconciliation of Free Cash Flow to net cash provided by (used in) operating activities, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue for the periods indicated:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Consolidated Statements of Operations Data: | |||||||||||||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | 9 | 10 | 9 | 11 | |||||||||||||||||||
| Research and development | 34 | 48 | 40 | 86 | |||||||||||||||||||
| Sales and marketing | 22 | 21 | 23 | 31 | |||||||||||||||||||
| General and administrative | 12 | 19 | 14 | 43 | |||||||||||||||||||
| Total costs and expenses | 77 | 98 | 86 | 171 | |||||||||||||||||||
| Income (loss) from operations | 23 | 2 | 14 | (71) | |||||||||||||||||||
| Other income (expense), net | 4 | 7 | 4 | 7 | |||||||||||||||||||
| Income (loss) before income taxes | 27 | 9 | 18 | (64) | |||||||||||||||||||
| Income tax expense (benefit) | 0 | 0 | 0 | 0 | |||||||||||||||||||
| Net income (loss) | 27 | % | 9 | % | 18 | % | (64) | % | |||||||||||||||
Three and nine months ended September 30, 2025 and 2024
Revenue
|
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | $ Change | % Change | 2025 | 2024 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 584,911 | $ | 348,351 | $ | 236,560 | 68 | % | $ | 1,476,899 | $ | 872,498 | $ | 604,401 | 69 | % | |||||||||||||||||||||||||||||||
Revenue for the three and nine months ended September 30, 2025 increased by $236.6 million and $604.4 million, or 68% and 69%, respectively, compared to the prior year periods. The growth in revenue was due primarily to an increase in advertising revenue driven by an increase in impressions delivered and to a lesser extent, an increase in pricing. In addition, other revenue increased during the nine months ended September 30, 2025 as a result of content licensing agreements executed in 2024.
Cost of Revenue
|
Three months ended September 30, |
Nine months ended September 30, |
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| Cost of revenue | $ | 52,509 | $ | 34,633 | $ | 17,876 | 52 | % | $ | 135,498 | $ | 91,750 | $ | 43,748 | 48 | % | |||||||||||||||||||||||||||||||
Cost of revenue for the three and nine months ended September 30, 2025 increased by $17.9 million and $43.7 million, or 52% and 48%, respectively, compared to the prior year periods. The increase in cost of revenue was primarily attributable to increased hosting usage to support user growth and product enhancements on our platform, as well as an increase in other services related to advertising, partially offset by lower hosting prices.
Research and Development Expenses
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Three months ended September 30, |
Nine months ended September 30, |
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| Research and development | $ | 196,379 | $ | 166,701 | $ | 29,678 | 18 | % | $ | 584,260 | $ | 746,508 | $ | (162,248) | (22) | % | |||||||||||||||||||||||||||||||
Research and development expenses for the three and nine months ended September 30, 2025 increased by $29.7 million, or 18%, and decreased by $162.2 million, or 22%, compared to the prior year periods, respectively. The increase in the three months ended September 30, 2025 compared to the prior year period was driven primarily by an increase in employee-related costs, driven in part by an increase in headcount, and an increase in stock-based compensation expense. The decrease in the nine months ended September 30, 2025 compared to the prior year period was driven primarily by the cumulative catch-up upon IPO of stock-based compensation expense and related taxes for RSUs with a liquidity event vesting condition recognized in the prior year period, partially offset by an increase in other employee-related costs in the current period.
Sales and Marketing Expenses
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Three months ended September 30, |
Nine months ended September 30, |
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| Sales and marketing | $ | 128,707 | $ | 74,510 | $ | 54,197 | 73 | % | $ | 340,011 | $ | 270,063 | $ | 69,948 | 26 | % | |||||||||||||||||||||||||||||||
Sales and marketing expenses for the three and nine months ended September 30, 2025 increased by $54.2 million and $69.9 million, or 73% and 26%, respectively, compared to the prior year periods. The increase in sales and marketing expenses in both the three and nine months ended September 30, 2025 was driven primarily by an increase in marketing expense and in
employee-related costs, driven in part by an increase in headcount. In the nine months ended September 30, 2025 the increase was partially offset by the cumulative catch-up upon IPO of stock-based compensation expense and related taxes for RSUs with a liquidity event vesting condition recognized in the prior year period.
General and Administrative Expenses
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Three months ended September 30, |
Nine months ended September 30, |
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| General and administrative | $ | 68,774 | $ | 65,653 | $ | 3,121 | 5 | % | $ | 206,974 | $ | 377,617 | $ | (170,643) | (45) | % | |||||||||||||||||||||||||||||||
General and administrative expenses for the three and nine months ended September 30, 2025 increased by $3.1 million, or 5%, and decreased by $170.6 million, or 45%, compared to the prior year periods, respectively. The decrease in the nine months ended September 30, 2025 compared to the prior year period was driven primarily by the cumulative catch-up upon IPO of stock-based compensation expense and related taxes for RSUs with a liquidity event vesting condition recognized in the prior year period.
Other Income (Expense), Net
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Three months ended September 30, |
Nine months ended September 30, |
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| Other income (expense), net | $ | 22,035 | $ | 22,968 | $ | (933) | (4) | % | $ | 63,716 | $ | 58,246 | $ | 5,470 | 9 | % | |||||||||||||||||||||||||||||||
Other income (expense), net for the three and nine months ended September 30, 2025 decreased by $(0.9) million, or (4)%, and increased by $5.5 million, or 9%, compared to the prior year periods, respectively. The increase in the nine months ended September 30, 2025 compared to the prior year period was primarily due to higher interest earned on our cash and investments driven by a higher invested balance.
Income Tax Expense (Benefit)
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Three months ended September 30, |
Nine months ended September 30, |
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| Income tax expense (benefit) | $ | (2,086) | $ | (31) | $ | (2,055) | NM | $ | (4,246) | $ | 118 | $ | (4,364) | NM | |||||||||||||||||||||||||||||||||
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NM - Not meaningful
Income tax expense (benefit) for the three and nine months ended September 30, 2025 decreased by $2.1 million and $4.4 million compared to the prior year periods, respectively. The income tax benefit in the current year periods was primarily attributable to an excess tax benefit from stock-based compensation in a foreign subsidiary.
Liquidity and Capital Resources
We have historically financed our operations primarily through net proceeds from the sale of convertible preferred stock and payments received from our customers. Additionally, in March 2024, we completed our IPO, which resulted in net proceeds of $600.0 million after deducting underwriting discounts and commissions of $31.6 million. We began generating net positive operating cash flows in 2024. Our primary uses of cash are employee-related costs and the cost of hosting our mobile applications and website.
As of September 30, 2025, we had $2.2 billion in cash, cash equivalents, and marketable securities. Our cash and cash equivalents consist of cash in bank accounts, money market accounts, certificates of deposit, and other highly liquid investments with original maturities of 90 days or less from the date of purchase. Marketable securities consist of U.S. government securities, investment-grade corporate and government agency securities, and commercial paper. As of
September 30, 2025, approximately 2% of our cash, cash equivalents, and marketable securities was held outside of the United States.
On July 1, 2025, we entered into an Amended and Restated Credit and Guarantee Agreement, which amended and restated our prior Credit and Guarantee Agreement dated October 8, 2021 (as amended on May 23, 2023), and provides for a five-year, $500.0 million, revolving loan and standby letter of credit facility ("Revolving Credit Facility") of which $100.0 million can be issued as letters of credit and another $100.0 million of which can be borrowed in certain non-U.S. dollar currencies. As of September 30, 2025, we have issued three letters of credit, two of which are denominated in a foreign currency, for an aggregate of $5.4 million, which reduced the letter of credit borrowings available under the Revolving Credit Facility to $94.6 million. The aggregate available balance under the Revolving Credit Facility was $494.6 million as of September 30, 2025.
Under the terms of the Revolving Credit Facility, borrowings can be ABR Loans, Term Benchmark Loans, or RFR Loans. Outstanding ABR Loans bear interest at a rate equal to the greatest of (A) the Prime Rate, (B) the NYFRB Rate plus 0.5%, or (C) the Adjusted Term SOFR Rate plus 1.0% (each as defined in the Revolving Credit Facility), in each case plus 0.25%. Outstanding Term Benchmark Loans bear interest at the Adjusted Term SOFR Rate, the Adjusted EURIBOR Rate, the Adjusted Term CORRA Rate, or the Adjusted AUD Rate (each as defined in the Revolving Credit Facility), as applicable, in each case plus 1.25%. Outstanding RFR Loans bear interest at a rate equal to the Adjusted Daily Simple RFR (as such term is defined in the Revolving Credit Facility) plus 1.25%. We are required to pay a quarterly commitment fee that accrues at 0.15% per annum on the unused portion of the aggregate commitments under the Revolving Credit Facility.
The Revolving Credit Facility contains customary conditions on our borrowings, including events of default and covenants. Covenants include restrictions on our and certain of our subsidiaries' ability to incur indebtedness, grant liens, make distributions to holders of our preferred and common stock, make investments, or engage in transactions with our affiliates, and require us to adhere to a maximum total leverage ratio. The obligations under the Revolving Credit Facility are secured by liens on substantially all of our assets, including intellectual property assets. However, the Revolving Credit Facility provides for the permanent release of guarantees and collateral upon our achievement of certain investment grade ratings. We were in compliance with all covenants as of September 30, 2025.
We believe our cash flows from operations, existing cash, cash equivalents, and marketable securities, and amounts available under our Revolving Credit Facility will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months and for the foreseeable future. We continuously evaluate our liquidity and capital resources, including our access to external capital, to ensure we can finance our future capital needs.
The following table summarizes our cash flows for the periods presented:
| Nine months ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (unaudited) | |||||||||||
| (in thousands) | |||||||||||
| Net cash provided by (used in) operating activities | $ | 424,068 | $ | 132,071 | |||||||
| Net cash provided by (used in) investing activities | (13,065) | (397,590) | |||||||||
| Net cash provided by (used in) financing activities | (61,492) | 380,238 | |||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 349,511 | $ | 114,719 | |||||||
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Free Cash Flow(1)
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$ | 420,526 | $ | 126,665 | |||||||
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(1)See "Non-GAAP Financial Measures-Free Cash Flow" for more information and for a reconciliation of Free Cash Flow to net cash provided by (used in) operating activities, the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP.
Operating Activities
Net cash provided by operating activities was $424.1 million in the nine months ended September 30, 2025, resulting primarily from net income of $278.1 million in the nine months ended September 30, 2025, adjustments for non-cash items, primarily related to stock-based compensation expense of $258.0 million, and an increase in accounts payable and accrued expenses and other current liabilities of $60.9 million due to the timing of payments. These amounts were partially offset by an increase in accounts receivable of $138.8 million due to the timing of cash collections and an increase in prepaid expenses and other assets of $23.4 million. Net cash provided by operating activities was $132.1 million in the nine months ended September 30, 2024, resulting primarily from adjustments for non-cash items, primarily related to stock-based compensation expense of $716.5 million, and an increase in accounts payable and accrued expenses and other current liabilities of $44.6 million due to
the timing of payments. These increases were partially offset by net loss of $(555.3) million in the nine months ended September 30, 2024, an increase in accounts receivable of $38.9 million due to the increase in revenue, and net amortization of premium (accretion of discount) on marketable securities of $(31.9) million.
Investing Activities
Net cash used in investing activities was $(13.1) million in the nine months ended September 30, 2025, primarily due to additional purchases of marketable securities of $1.6 billion, partially offset by maturities and proceeds from the sale of marketable securities of $1.6 billion. Net cash used in investing activities was $(397.6) million in the nine months ended September 30, 2024, primarily due to additional purchases of marketable securities of $1.4 billion and cash paid for acquisitions, net of cash acquired of $17.1 million, partially offset by maturities of marketable securities of $1.0 billion.
Financing Activities
Net cash used in financing activities was $(61.5) million in the nine months ended September 30, 2025 and consisted primarily of cash payments for taxes related to net share settlement of restricted stock units of $80.5 million, partially offset by proceeds from exercises of employee stock options of $20.5 million. Net cash provided by financing activities was $380.2 million in the nine months ended September 30, 2024 and consisted primarily of cash proceeds from issuance of Class A common stock in our initial public offering, net of underwriting discounts and commissions, of $600.0 million and proceeds from exercises of employee stock options of $62.9 million, partially offset by cash payments for taxes related to net share settlement of restricted stock units of $268.1 million.
Free Cash Flow
Free Cash Flow was $420.5 million for the nine months ended September 30, 2025, and was composed of net cash provided by operating activities, resulting primarily from net income and adjustments for non-cash items and changes in working capital. Free Cash Flow was $126.7 million for the nine months ended September 30, 2024, and was composed of net cash provided by operating activities, resulting primarily from adjustments for non-cash items and changes in working capital, partially offset by net loss. Free Cash Flow also included purchases of property and equipment of $3.5 million and $5.4 million for the nine months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025, the increase in Free Cash Flow as compared to the prior year period was driven primarily by the increase in net income.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Contractual Obligations and Commitments
We have non-cancellable contractual obligations and commitments primarily related to third-party cloud infrastructure agreements under which we are granted access to certain cloud services as well as operating lease agreements. During the nine months ended September 30, 2025, there were no material changes outside the normal course of business to the purchase obligations as disclosed in the audited consolidated financial statements as of and for the year ended December 31, 2024 included in the Annual Report.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP. Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ significantly from these estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, results of operations, financial condition, and cash flows will be affected.
There have been no material changes to our critical accounting policies and estimates as described in our Annual Report.
Recent Accounting Pronouncements
See Note 2-Basis of Presentation and Significant Accounting Policiesof the notes to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for any recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
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