Are You Overpaying For Reddit Stock Versus Its Rivals

Investors pay more for each dollar of profit from Reddit (RDDT) than they do for Meta Platforms, Alphabet, or Match, the rivals in its peer group whose earnings can be compared. That valuation would be easy to accept if Reddit simply executed better across the board. The company does grow faster than all four of its peers, Pinterest included. Yet it keeps less of its revenue as operating profit than three of them. So what do you get for the extra price?

What You Get For Reddit's Premium Over Meta

You get growth. Reddit grew its revenue by 66.6% over the four quarters to June 30, 2026. That is more than double the 27.7% Meta Platforms reported for the same period. For that growth, you pay 34.5 times Reddit's earnings, compared with 26.5 times for Meta.

You do not get Meta's profitability. Meta turned 38.1% of its revenue into operating profit, while Reddit kept 28.2%. Alphabet and Match also trade at lower multiples of their earnings and grow more slowly than Reddit. Across the group, the premium pairs with the growth. Pinterest's P/E does not compare, because Pinterest lost money in two of its last four quarters.

Reddit still carries the highest comparable P/E in the group. That valuation holds even though its share price fell 22.2% in the year to October 16, 2026, a worse showing than every peer except Pinterest.

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How Reddit Is Growing Its Ad Sales

Ads make up nearly all of Reddit's sales. Ad revenue reached $762 million in the second quarter of fiscal 2026, up 64% from a year earlier. Management noted on the July 30 call that this growth came from both higher prices and more ads shown. The number of active advertisers also grew by more than 70%. Revenue from Reddit's scaled channel doubled from a year earlier. This channel includes mid-market clients as well as SMBs, the small and mid-sized businesses that buy its ads.

With the premium, you are paying for an ad seller that is adding advertisers and charging them more. Reddit operates with a lower margin than Meta, but that figure has risen fast. The company recorded an operating margin of just 7.9% over the four quarters to June 30, 2025. This means Reddit's margin has more than tripled in a year.

What Reddit Expects For Fiscal Q3 2026

Reddit grew its revenue by more than 60% from a year earlier in each of the four quarters to June 2026. Management now expects revenue of $860 million to $870 million in the third quarter of fiscal 2026. They estimate that figure at 47% to 49% growth. That forecast sits below the 61.1% growth Reddit reported for the second quarter.

Management also noted on the July 30 call that traffic sent to Reddit by search was choppy in the second quarter. The company added that it has little visibility into search and expects that traffic to stay volatile.

The stock price appears to assume that Reddit keeps growing far faster than its rivals while its margin keeps rising. Reddit has done both over the past year, yet management itself expects slower growth in the third quarter. When Reddit reports on or around November 4, watch whether its revenue growth lands within the 47% to 49% management expects.

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Reddit is one stock among several rivals a holder could own instead. When the advisor who built your plan moves on, it is a natural moment to ask whether the plan still fits the life you have now. Glenn Caldicott, CIO of our Boston-based partner firm Empirical Asset Management, an SEC-registered investment adviser, offers a free review of your holdings, fees and income plan.

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