Reddit's Q1 revenue increases by 69% to reach $663 million, while its shares rise by 9%.

      The social media platform exceeded Wall Street projections in every category, increased its Q2 guidance above expectations, and reported $1 million in capital expenditure, which contrasts starkly with the massive capital expenditure arms race among hyperscalers.

      Reddit announced a revenue of $663 million for the first quarter of 2026, marking a 69% increase compared to the previous year, and surpassing the Wall Street consensus of $611 million in earnings released after the market closed on Thursday.

      Earnings per share came in at $1.01, exceeding the 58-cent estimate. Daily active unique users (DAUs) reached 126.8 million, reflecting a 17% year-on-year increase and outpacing the projected 125.9 million analysts had anticipated. Shares surged over 9% in after-hours trading.

      Advertising revenue experienced a 74% year-on-year growth and contributed significantly to the overall results. Performance advertising, which aims to drive measurable actions such as purchases, installs, or sign-ups, accounted for over 60% of total ad revenue, as stated by COO Jen Wong during the post-earnings call.

      The ‘Other revenue’ category, which includes Reddit’s data licensing operations in collaboration with AI partners like Google and OpenAI, increased by 15% to $39 million.

      Average revenue per user saw a significant rise: global ARPU reached $5.23 compared to the estimated $4.81, while US ARPU hit $9.63, outperforming the expected $8.53. The adjusted EBITDA margin stood at 40%, with a gross margin of 91.5%.

      The company has projected Q2 revenue between $715 million and $725 million, indicating a 43% to 45% increase year-on-year and surpassing consensus estimates, along with adjusted EBITDA guidance of $285 million to $295 million, also exceeding the $277.1 million estimate. The projected total revenue for the full year 2026 is now approximately $3.14 billion.

      The capital-light approach is notable. Reddit’s capital expenditure for the quarter was just $1 million, a figure that gains significance in light of Meta’s recent capex guidance of $125 billion to $145 billion for 2026, Alphabet’s forecast of $180 billion to $190 billion, and AWS’s parent company’s commitment of around $200 billion.

      Combined AI capital expenditure for 2026 across the five leading hyperscalers is on track to surpass $650 billion. CEO Steve Huffman emphasized Reddit’s position on the call: “We have a record cash flow of over $300 million while our capital expenditures remain low at only $1 million, highlighting the benefit of Reddit’s capital-light model.”

      Huffman implied that Reddit is able to take advantage of the AI infrastructure boom without needing to invest in it. The primary input for the company is user-generated content, produced for free by 126.8 million daily users for community engagement rather than for corporate profit, and is sold at significant amounts to the AI labs that require it.

      Google and OpenAI, two of Reddit’s largest data licensing partners, are spending vast sums on infrastructure to train and operate models that partially utilize content created by Reddit users at no cost. From Reddit’s viewpoint, the economics of this arrangement are particularly favorable.

      Another supporting factor for Reddit is structural. Reddit Answers, the company's AI-driven search feature, has grown from 1 million queries to 15 million queries year on year. The transition from traditional search to AI-assisted search is rapidly accelerating by all available metrics.

      As we discussed earlier this month in Semrush’s examination of the agentic search transition, Google’s AI Overviews now activate on 48% of all monitored queries, organic click-through rates have dropped 61% on those queries, and ChatGPT has reached 800 million weekly active users, with Perplexity adding hundreds of millions more.

      This shift is typically viewed as detrimental to content sites, as traffic that used to come from Google search results is increasingly being captured by AI summarizers that access the content without directing users to it.

      However, Reddit has managed this transition well for two reasons. First, its content is genuinely hard to substitute; subjective opinions, personal experiences, and community assessments are more challenging for AI systems to synthesize convincingly compared to factual reference materials.

      Second, Reddit has formed commercial partnerships with leading AI labs rather than taking an adversarial stance. The licensing agreements with Google and OpenAI position Reddit as a paid contributor to AI search instead of being a victim of it.

      The contrast with recent actions by news publishers blocking access to the Internet Archive’s Wayback Machine to prevent AI training is telling. While the New York Times, USA Today, and the Guardian are investing legal and engineering resources to exclude AI labs from their content, Reddit has opted for an opposite strategy by licensing access on commercial terms, accepting the AI-driven traffic dynamics