Reddit July 31

Rating Company Date 31 July 2026 Buy Reddit Forecast Change North America United States Reuters Bloomberg Exchange Ticker Price at 30 Jul 2026 (USD) 178.04 RDDT.N RDDT US NYS RDDT Price target 200.00 TMT 270.71 - Internet 52-week range 121.84

Strong ARPU, Weak Users: Debate Shifts to Search, App, and Google Valuation & Risks

Benjamin Black, CFA Reddit delivered another very strong financial quarter, which we would frame as Research Analyst mixed, with near-term user disappointment, strong monetization validation, and increased fear around partnership renewals. Kunal Madhukar, CFA Research Analyst Revenue of $805mn grew 61% y/y, above the company’s prior $715mn to $725mn guide and roughly in line with the upside framework we laid out in our preview, while Adj. EBITDA of $343mn represented a 43% margin and more than doubled Raymond Wong Research Associate y/y. Advertising revenue grew 64% y/y to $762mn, ARPU increased 36% y/y to $6.18, and the company crossed $1mn of revenue per employee, reinforcing the view that Reddit’s monetization engine continues to scale unusually well. Benjamin Hui, Esq. Research Associate That said, this was not a clean quarter as the user trends exacerbated investor

concerns regarding the sustainability of growth. Global DAUq grew 18% y/y to ~130mn, but US DAUq declined modestly q/q, for both logged-in and logged-out Key changes

users. Management attributed the weakness primarily to search referral volatility, 250.00 to TP ↓ -20.0% 200.00 with the international headwind tied to Google ranking machine-translated content lower, and the US headwind less visible but likely related to the broader trend EPS (USD) 5.56 to 5.44 ↓ -2.0%

toward AI Overviews on Google. 3,263.5 to Revenue (USDm) ↑ 3.9% 3,389.8 Source: Deutsche Bank We think the debate now comes down to whether Reddit can convert its large weekly and logged-out user base into more durable, higher-value app users quickly enough to offset lower-quality search referral traffic. We believe app users are materially more valuable than drive-by web traffic, given app users are ~4x more engaged and upwards of 7x more monetizable than web users coming from search. Reddit is now testing more aggressive app-conversion prompts, including lowering the frequency threshold from users visiting four times per week to three times per week during the quarter. However, whether it is successful, and how quickly it can manage the transition, remain outstanding questions, in our view.

On the other hand, the 3Q guide also appears conservative in our view, although management highlighted that spend in the quarter is seasonally back-end loaded, i.e. in September. In total, the revenue guide of $860-$870mn, or up 47-49% y/y (vs Street at ~$830mn), implies 7-8% q/q growth, significantly smaller than the average ~16% q/q growth the company has delivered in the past 5 years. The Adj. EBITDA outlook of $385-$395mn, implying a 45% margin at the midpoint, came in above consensus at $367mn. For the upcoming quarter, we are now projecting revenue of $869mn, up +49% y/y, a ~12-pt deceleration on a ~10-pt easier comp,

Deutsche Bank Securities Inc. IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

and Adj EBITDA of ~$390mn, at ~45% margins.

Net/net, we come away with a more nuanced, but still constructive, view. The user debate is real and now more complicated because Google / AI Overview risk is no longer abstract. However, Reddit’s commercial momentum remains best-in-class, the 3Q guide appears to embed continued conservatism, Shopify and lower-funnel products are still early, and management continues to point to meaningful headroom in feed ranking, app conversion, measurement, automation, and ML- driven ad performance. The key near-term question, in our view, is whether investors will underwrite the monetization story while waiting for…