A Sign of More Upside?

Reddit RDDT is benefiting from strong momentum in its advertising business, which has emerged as a key driver of growth for the company. In the second quarter of 2025, Advertising revenues surged 84% year over year to $465 million.

Growth was driven by both existing advertisers deepening their investments and a 50% increase in the number of active advertisers. This growth highlights Reddit’s ability to attract advertisers across large, mid-market, and small-to-medium-sized businesses.

The company also benefits from strong growth in user engagement, including rising daily and weekly active users, Average Revenue Per User gains and expanding advertiser tools such as DPA, Reddit Pixel and CAPI. 

RDDT is expanding search-led engagement through Reddit Answers. In the second quarter of 2025, Reddit Answers experienced significant growth, with the number of weekly users increasing from 1 million to 6 million. Moreover, improving impressions and a rise in pricing are driven by Reddit’s investments in performance and targeting in the middle and lower funnel, which is expected to drive ad revenues.

The company’s focus on automation and usability is further enhancing its ad platform. The platform has integrated tools like Smartly, which combines Reddit’s audience and performance data with AI-powered advertising capabilities, making it easier for advertisers to launch, scale, and optimize campaigns.

RDDT is facing stiff competition from competitors like Meta Platform META and Snap SNAP, which are also expanding into advertising to compete in the rapidly growing digital ad market.

Meta Platforms is working on integrating AI into its platforms, including Facebook, WhatsApp, Instagram, Messenger, and Threads. This effort is aimed at increasing user engagement and boost ad revenues. In the second quarter of 2025, Meta Platforms reported that advertising revenue increased 21.5% year over year to $46.56 billion and accounted for 98% of revenues. At cc, revenues increased 22% year over year.

In the second quarter of 2025, Snap’s advertising platform demonstrated significant performance improvements through enhanced AI capabilities and optimization tools. Purchase volume for commerce advertisers increased 39% year over year, while total purchase-related advertising revenues grew more than 25% from the prior-year period. 

The company’s Sponsored Snaps format proved particularly effective at driving incremental conversions, generating up to 22% higher conversion rates when integrated into broader advertising campaigns, and delivering an 18% improvement in unique converters across app installations and in-app purchases.