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I like RDDT, I yolo on it, but some other guy's post sparked me to write this... I'm posting to dispel rumors, for my own research, and b.c that guy really did annoy me.
I'm going to explain where RDDT makes it's money, and explain why analyst ratings are so high.
>Where does RDDT make it's money?
Reddit's primary revenue source is Ads, over 90% of Reddit's revenue comes from advertising sales (approx. $2.1 billion in 2025). Specifically, ads for Active Users. While exact figures for "inactive" users are not released, the company focuses on the 121M Daily Active Users, as they are the primary targets for its 75% year-over-year growth in advertising revenue ($690 million in Q4 2025).
Less than 10% of Reddit's revenue is from AI training data (GOOG, OpenAI, Cision, etc.). In my opinion, this revenue is not viable long term, as it's a "front-loaded" model that will be relied on less and less as AI models develop. Additionally, this revenue only has modest growth. As of early 2026, AI data licensing generates over $100 million annually for Reddit, with data licensing deals in Q3 2025 reaching $36 million, up 7% year-over-year.
Other revenue includes Premium Subscriptions ($36 million annually by 2026.), Awards and Collectables, Data API Fees (charges for API access), Affiliate Partnerships, and Monetizing AI-Generated Summaries (Reddit Answers). In 2025, Reddit's Other Revenue segments generated $140 million, representing roughly 6.4% of its total annual revenue. It grew 22% year-over-year, climbing from $114.75 million in 2024 to $140.03 million in 2025.
>Analysts ratings, where do they get the numbers?
($320 Evercore ISI, $300 Needham, etc.)
Analysts focus on ad revenue growth, expanding AI data licensing deals, and increasing profitability. Together, these support premium valuation models. Price targets are justified by forecasts of 40%+ revenue growth and expanding EBITDA margins.
Ad revenue, noted at 75% year-over-year in late 2025 to early 2026, can keep expanding. Analysts currently use a growth rate of 40% for they're calculations.
AI training data estimates are as high as over $100 million annually.
Increasing profitability expectations are for net profit margins to potentially reach over 40% (adjusted EBITDA) as the business scales.
A higher PE multiple, compared to slower-growing peers, amplify the high price targets. (Currently, RDDT has a multiple of 62. Twice that of GOOG's 31).
If you add up these numbers, with a 40% growth rate on their net income of $530 million gives 2026 a forecast of $742 million on it's 191 million shares outstanding, or $3.85 per share. Take into consideration the $1 billion share repurchase plan and the stock could double from it's current valuation (let alone if they increase their revenue growth over the growth rate of 40%... It was 69% in the last quarter of last year (Nice!)).
If you have any questions let me know, I'll do my best to reply to them.