By Hamza Faisal

Reddit beat Wall Street on its third quarter — and the market punished it anyway. The discussion platform reported revenue of $895 million, up 53% from a year earlier, and net income of $283 million, up 74%, with diluted earnings of $1.40 a share ahead of the roughly $1.31 to $1.33 analysts expected. But shares still fell about 10% in early after-hours trading on Thursday, as investors focused on what the quarter said about Reddit's user base rather than its profits.

The culprit was guidance that landed softer than hoped. Reddit forecast fourth-quarter revenue of $1.00 billion to $1.03 billion — a midpoint slightly below analyst consensus — and the report showed its most valuable market, the United States, quietly shrinking even as the business grew.

Growth now comes from outside the US

Global daily active uniques rose 12% to 130.3 million and weekly users grew 16% to 515.2 million, but all of that growth came from outside the US. American daily users slipped 2% to 50.7 million, while international daily users jumped 24% to 79.6 million. Logged-out US users — often people arriving from a Google search — fell 4%, a reminder that part of Reddit's traffic depends on a search engine it does not control.

The offset is monetization. US revenue still rose 50% to $719 million because the average revenue per US daily user climbed 53% to $13.82. Logged-in users, which Reddit calls its most engaged and monetizable audience, grew 7% globally to 53.5 million, though only 1% in the US. In other words, Reddit is earning more from each American user even as fewer of them show up.

Ads carry the quarter

Advertising did the heavy lifting. Ad revenue rose 54% to $847 million, while other revenue grew 35% to $48 million. Gross margin widened to 91.5%, adjusted EBITDA climbed 70% to $402 million — a 44.9% margin — and free cash flow nearly doubled to $363 million. Revenue over the last twelve months has now passed $3 billion, a milestone chief executive Steve Huffman highlighted in the release.

The quarter also brought two markers of arrival: Reddit was added to the S&P 500 index, and the company repurchased about 670,000 shares for $100 million at an average price of $149.81. Cash and marketable securities stood at $3.03 billion at the end of September.

A logged-in future

"Our business is growing because the Reddit experience captures the human experience in a way that no other platform can replicate," Huffman said. "Surpassing $3B of revenue over the last 12 months shows Reddit's strength as a destination and the differentiated value of our platform."

That destination is changing shape. Huffman has said Reddit is moving toward a logged-in experience, with most posts requiring an account — a shift aimed partly at stopping AI bots from scraping the site. The strategy bets that logged-in app users, who already drive more than 80% of audience revenue, matter more than drive-by visitors. The third quarter showed both sides of that bet: the monetizable core is growing, but slowly in the US, and the open web funnel feeding it is narrowing.

For now, advertisers clearly still want Reddit's users — the question the fourth quarter must answer is how many users there will be left to reach.