Thank you. I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Our first question comes from Tom Champion from Piper Sandler. Please go ahead, your line is open.

Great. Good afternoon. Very strong quarter commercially. Jen, what drove the strength in the ads business this quarter? Then for Steve, as you think about 2Q and early 3Q, what do you want investors to understand about the trend in user growth and your ability to drive high-quality users to Reddit? Thank you.

Okay. Thanks, Tom. I'll take the first question. Look, I think it was another strong quarter. You see the consistency in our business. Number one, I think our message is resonating with advertisers broadly. Our influence in the purchase decision journey, I think is clear. I think increasingly they realize that their customers are putting an increasing value on human advice, and Reddit is the place for that, so they realize how important our environment is. We continue to deliver market competitive outcomes. Our strategy, I think, just continues to build momentum. Our strategy has been making every impression more valuable. When you look at the volume of conversions growing and clicks growing, what that means for an advertiser is that they're getting more outcomes at equal or better prices. We're just getting more competitive with all the signals, ML work, and optimization work that we're doing. The other piece that I think is really kicking in is very strong adoption of our tools. This is making it easier to onboard advertisers. This is why you see advertiser growth 70% year-over-year because we're able to make it easier to onboard advertisers. We're then delivering more efficiency, which retains them and allows them to scale spend. We're making it easier for them to stay always on with more credit line adoption and taking friction out of working across the funnel. Finally, what I'll say is I think our business is diversifying across so many dimensions that it's made it really resilient. If you look across verticals, 11 out of 15 verticals grew over 50% year-over-year. Our active advertiser count grew over 70%. Our scaled channel, which houses mid-market and SMBs, doubled. Rest of world grew 80%+. Our footprint is just getting so much more diversified, which makes our business also very resilient and flexible.

Okay. Second question, Tom, thanks, about users. As we said last quarter, our goal is to achieve 1 billion daily users globally at 100 million in the U.S. There's no change there. Reddit is a destination, and in the U.S., we have nearly 200 million users coming every week, and we primarily grow through our product work, and that's how we drive daily direct users, and we're making progress there. We added through that product work DAU in the quarter, but it was offset by a decline in search referrals. First on the product, we improved new app user retention. This was one of our most important metrics and priorities. It was up 50% year-over-year on a relative basis. We grew our reach. We crossed half a billion weeklies. U.S. and international weeklies both grew sequentially. On the contribution side, we made it easier to find a post in the right community. There are now 26 billion posts and comments on Reddit, with 1 billion added since Q1. Our thriving communities are growing significantly, and we're more effectively converting web users into higher value app and direct users. We saw success with video and comments, which is expanding our upper funnel. We did see headwinds in search referrals, particularly late in the quarter, and visibility with the referral traffic remains low. We're focused on what we can control, which is our direct users driven by product efforts. We believe this work will be transformational. It'll take time. This is how we get to that 1 billion global, 100 million users in the U.S.

Thank you.

Our next question comes from Ron Josey from Citi.

Great. Thanks for taking the question. Maybe a quick follow-up to Tom's question. Steve, you mentioned in the letter that growing DAUs is a top priority, and I know you just talked about app usage and the quality of the traffic, but talk to us a little bit more just around the products that can convert, call it the pretty strong WAU growth to DAUs. Particularly, I wanted to hear more about the focus on the feed. Then there's been a lot of articles and press reports just about the data licensing partnerships that you currently have. Any updates on strategy as you approach this or anything as we get closer and closer to call it the renewal rates in early 1Q for others? Thank you.

Sure. Thanks, Ron. On users, yeah, focused on the WAUs to DAUs would be an increase in frequency. We drive that primarily by making Reddit more sticky. You mentioned the feed. I think over the short, medium, and long-term improvements to our feed will improve that frequency. I think there's a lot of headroom there. To be frank, I think our feed technology is just behind the state of the art, which gives us a lot of headroom to catch up. I'm particularly encouraged at the talent we're bringing into Reddit over the last quarter to help build that next generation of feeds. All the little stuff works, too. We did hundreds of experiments in the last quarter, and many of them worked and are on our path to GA of just kind of chipping away at retention and quality, which drives that growth. This is in onboarding, this is in posting, this is in performance across the app. We're really starting to feel that momentum. I mentioned conversion, right? This is taking that big top-of-funnel web user base we have and converting those into mobile app users. We've been dialing that up as well and driving more downloads. Those users, many of them are already Reddit users, and they retain quite well and do even better in the app. We're seeing a lot of progress across the board there, and I think, again, a lot of headroom. On data licensing, no change in strategy. Working hard. Reddit's content is in demand, and it's not commodity content. People seek it out intentionally by name, and many come directly to Reddit. Our relationships here are multifaceted. Reddit is used for training, it's used for post-training, to teach these models how to talk. It's used for grounding. It's used as a search index. There are many layers and dimensions for how this can work. Reddit's data is valuable beyond just raw training data. These deals aren't binary. They have to make sense for Reddit, but there's many ways, I think, for the value to return to Reddit. Our goal is to maximize the value return to Reddit.

Thank you, Steve. Great quarter.

Thanks, Ron.

Our next question comes from Rich Greenfield from LightShed Partners.

Steve, I don't want to belabor this point, your stock is down sharply because there is just a sense from investors that you have a, I don't want to just be blunt, a user problem, especially in the U.S. That users are, it's only a slight tick down, but they're ticked down despite all of the investments you've made over the last year. I certainly hear you on the weekly improvement, but people are looking at the daily and saying the logged-out traffic is going to be under pressure because as search shifts to AI, you're not going to get referrals, and that it's going to be harder to get people to go from logged out to logged in, and that's sort of symptomatic of what you're seeing. You're buying back a lot of stock. You don't seem concerned, or you and Jen seem very confident. You, Jen, Andrew, all seem very confident. I guess, what gives you so much confidence that you're going to grow to 100 million logged-in users in the U.S. and 1 billion globally versus the slight tick down this quarter? There's obviously a big disconnect, and it's obviously impacting your stock. Just the second piece of that to follow up on Ron's question, do you see any world where you're not licensing data to Google and OpenAI next year?

Okay. Thanks, Rich. Look, let me start with the end first. We are confident because our product work is working. Reddit is communities and conversation. Communities are universal, we think we have, in the U.S., content for everyone, and it's a matter of revealing that, we're making progress towards that end. Moving new user retention in the app this significantly in a quarter is something that we're very proud of, that sort of improvement in retention drives growth, that is work that we're in control of. Yes, external search is volatile, particularly logged-out web, but that's not where our business lives, we will make sure that we get as much value from that traffic as we can. That's where we've been driving conversions from web to app, that's become more effective as well. Long-term, we are as confident as ever that we're going to get to those milestones that we've set. The work does take time, and we do have a lot of work to do in the product. Driving that direct growth is in our control, and we're seeing some progress there. Is there a world in which we don't do licensing? I think the range of outcomes is wide, and we have to look at every aspect of this and make sure that we're maximizing value to Reddit. Within Google, it's not just licensing. Our relationship with them actually predates the formal data licensing agreement. Our long history in 10 blue links, and now the Reddit placement in AI Overviews alongside licensing, and we've also seen this development in or an expansion of how Reddit's content is used, both with them and others. I don't think there's a binary outcome. I think all of these different touch points, whether we're talking about training or blue links or AI Overviews or whatever comes next, those are all independent decisions. We will make sure that we're maximizing the value to Reddit. For us, it's not just traffic or clicks. We want users into the Reddit ecosystem, right? Reddit is a community and conversation product. We want to bring users into that ecosystem and that flywheel of Reddit. That's what we're looking to do in any of these relationships.

Are there more buyers of that data than just Google and OpenAI in your mind?

Of course. One of the things that we've seen over the last year is more and more people interested in Reddit's data for different use cases or at different scales. We do look at this as an expanding marketplace with lots of different opportunities.

Our next question comes from Mark Mahaney from Evercore.

Hey, two questions, please. You talked about these headwinds and search referrals late in the quarter. Just put some context around this. Is this something that just pops up from time to time? Were those headwinds greater than what you normally see, less than what you normally see? Any interpretation as to what caused those referrals? Just back on the licensing, please. Any expectations you want to set as to when we'll get resolution on licensing, by the end of this year, halfway through next year, anything like that? Thank you very much.

Thanks, Mark. On the traffic, the search ecosystem continues to evolve. We've seen changes like this before. I won't comment on the magnitude, but I think what I've said before is this is not our first rodeo, and I've used that phrase on these calls before. We do see these changes. Specifically, we don't typically get much insight into what's going on. In this case, we've seen a couple of different aspects to it. One, we saw a decline in our machine-translated content. This was part of the volatility on the international side. Machine translation remains a useful strategy within our app for new users, so we have content to show them. With the evolution towards AI Overviews, I think more broadly, what we see is 10 blue links has driven tremendous value and growth to the broader ecosystem. From where we sit, AI Overviews has yet to make a similar level of positive impact, and I think that's consistent across the broader landscape, us, businesses, publishers, retailers. We're still looking for that win-win. Our visibility on search continues to remain low, and we expect it to probably continue to be volatile. What we're focused on is making Reddit a destination and driving more direct traffic to our app.

Our next question comes from Justin Post from Bank of America.

Great. Thanks. I'll try a different topic. Jen, you think about where you are with the U.S. You did over $20 in ARPU in the first half, approaching $50 for the year. How do you think about where you are with ad loads, auction density, advertiser ROIs? Is there still room to grow that significantly from here on your user base? Then maybe one for Drew. How are you measuring the returns on your marketing spend? Thank you.

Yeah. Happy to take that. Look, I think we still have a lot of ARPU headroom because I look at our roadmap, I see lots of ways that we can continue to deliver value for our advertising partners, i.e., more outcomes at more competitive prices. We're a marketplace. What's great about a marketplace is that you can have this be demand-driven as well as performance-driven. There's a lot of flexibility in the marketplace for the market to meet each other in terms of the supply and the demand. I do think that when I think about the headroom that we have, it will be driven by, I think, a lot of the outcomes across the funnel. If I had to give you where I think we're driving incremental value to advertisers today, it's that six-second guaranteed video view is incredibly valuable. It's been a really nice-performing product for us, and being Reddit with high intent, we intend to go deep on that view, and that's a really high-quality, high-value view. Obviously, the volume of conversions, the volume of app installs, the volume of leads, this is an area that we'll continue to do work. I feel really good about our ability to continue to drive our strategy, which is to make every impression more valuable. So long as we do that, I think that continues to fuel our business and continue to fuel our ARPU.

Justin, the primary metric we use to evaluate marketing spend is really a very straightforward cash model, P&L-based, looking at acquisition of a user, the cost of the user, looking at the retention of that user, the monetization of that user, netted out over a pretty short time frame. Overall, it's a pretty consistent look, I think, across the industry, give you a real straight value. Once in a while, we'll look at the balance sheet value. We'll look at the value of a user overall. Mostly it's a very straightforward kind of ROI-based quick payback model in the short term. That's how we think about it.

Our next question comes from John Colantuoni from Jefferies.

Great. Thanks for the questions. I wanted to come back to engagement. As you look to continue driving engagement, how do you see that impacting the experience for users on the homepage versus in subreddits? Could you see the feed looking more like some other social platforms that are doing a good job marrying machine learning and video content? Second question, maybe just on Reddit Answers and Search. Can you give us an update on engagement trends within Search and where you are in launching a generally available advertising offering on that surface? Thanks.

Okay. I'll take the first two and maybe Jen coming on the end. Okay. Thanks for the question, John. In terms of engagement distribution across the app, even today, the primary surface is the home feed versus subreddits. This is why it's such an essential service, and this is why our surface and why we see so much headroom in improving our performance there, improving the technology that backs that feed, because it does a lot of the heavy lifting of juggling a user's subreddits, and it's one of the primary drivers of subreddit discovery. I expect it will continue to do much of the heavy lifting. You're touching on something that we're working on right now, which is how do we show video in the home feed. This has been something on our minds for a while, getting this right, especially as we have more and more video content on Reddit. There are two aspects to this. The first is just generally how do we make video work in the feed because it's such a mixed-media feed, right? You've got video, you've got text, you've got images. Those flows between from feed to theater mode to the comment page, back to the feed, are essential. I think I know there's a lot of opportunity for improvement there. We're working on, I think some things that really streamline that and help. The other thing we're working on is just a video Reddit experience. Letting users not just watch video on Reddit, but listen to posts, background listen to posts. We see folks doing this off-platform. There's an emerging content type, elsewhere on the internet of basically a podcast where people read Reddit content. I think this version of like listened to or spoken Reddit can be really engaging as well. That would be almost a different format entirely. There is a lot of things that we're working on now that I'm looking forward to testing later this year. On answers and search, making steady progress there. The search bar is now universal within the app. We grew both searchers and searches in the quarter. I think for many queries that I run at least, Reddit is now the best platform for searching Reddit. That hasn't always been the case, we're chipping away at that. I think, any query where you want to know something or want to see multiple perspectives, like what should I watch? What do people think about this? What should I buy? Reddit provides the best answers on the internet. I'm really encouraged with the progress there, we're starting to look towards ads on that surface, which I'll turn over to Jen to address.

Yeah. Search is a space where it's very married to a shopping experience. There are a couple of different angles to this. One is that we think that the search page can be enriched with more rich media modules, so it can have product visuals from the catalogs that we have when people are searching or discussing a specific product. We've started to do that. We had done a test early on electronics and consumer electronics, now we've expanded those categories. That enriches the core search experience and hopefully increases engagement so people get more out of that experience. I do agree with Steve that I think especially the agentic ask function on Reddit search, I think is now the best way to search Reddit. The second is what goes along with that engagement at the product level when you have a match, is ads, right? I talked about our shopping listing ads where you can have a module that has multiple different retailers and product types and brands in one module. That's a great sort for a search page, and that's ultimately how I think ads would be well-represented on search. That's a space that we're eyeing. We clearly have the capability to do it. We keep tracking as the page settles and as users adopt that. We do see an advertising opportunity there, and the good news is we have the infrastructure, and I think a lot of that capability already queued up.

Our next question comes from Josh Beck, from Raymond James.

Thanks for taking the question. Maybe more of a multi-pronger on the product side. The new app user retention, you certainly highlighted as an area of early success. I think you said it was up maybe 50% year-over-year, small base. Just kind of curious specifically what unpacked that, and I assume that's part of the confidence in the product work that you have moving forward. On the feed models, I don't know if you can maybe give us some type of purview into the drivers. Obviously, there's a lot that goes into building these models between retrieval and ranking and serving and refresh, and there's 1 million different parameters, and you probably don't want to get too much detail. Just any sense you can give us on maybe what are some of the specific areas you're focusing within the feed improvement? Thank you.

Sure. Thanks, Josh. New app user retention. Yes, 50% on a relative basis, which it's a hard number to move and it's one of our most important. It's I think our best measurement of product quality. Do users open Reddit and then want to come back the next week? That's what we've been moving. There's a number of factors here. One of the biggest is conversion. We're basically taking core users or frequent users from the web and turning them into app users, where they become even better users. We have a lot of those. Second is within the app itself. Onboarding is much improved, more effectively connecting users to their home on Reddit. Some of the in-the-trenches work around login, account recovery, preserving logins after reinstalls, all of these things add up, and have pushed this number higher. I think both the new retention or the new user retention on an absolute basis has still a lot of room for improvement. This is what we've been talking about for years. Once users get Reddit, they really get it, but it can be a hard product to get. Every time we make it easier, we grow. This is the healthy mix shift we've been looking for, and I can start to see the momentum. That's why we're confident. On the feed, you're right, we could talk about this all day. I'd say broadly, the models we use today are smaller than state-of-the-art, significantly smaller. We can scale up the size of the model. Our models update slower, so days instead of versus state-of-the-art, which is hours or minutes. The amount of our user activity that we actually incorporate into the models is 10% of our user activity, where that could be significantly higher. Basically, across the board. Oh, and the category set, the candidate set. Posts that are eligible for recommendation. Reddit right now is limited to a week, and Reddit, our feed is almost like a real-time feed where we have this actual massive corpus. Much of that content is timeless. Think about things like parenting advice or book or movie reviews. Things like that are relevant for a very long time. We don't show those on the feed at all. We can dramatically improve candidate selection, model size, model speed, the signals that go in from users. Pretty much every dimension we have sometimes order of magnitude improvement opportunities. We'll be doing that work over the next year, and I expect every improvement we make to work because we're just starting from such a low base.

Our next question comes from Andrew Boone from Citizens.

Thanks so much for taking the questions. Jen, I wanted to ask about SMB. You guys have Shopify coming on board. It sounds like Max is doing well. Can you just unpack the success that you're seeing with SMBs, and then what should we be thinking about as we think about the back half of the year in that group? Steve, just going back to engagement, if I think about the feed and platforms that are scaled, everyone kind of has a creator ecosystem that's kind of down to that billion-user level. Do you guys need to do anything different in terms of the content that's on the platform to really get to the scale, or do you guys think you have what you need today? Thanks so much.

I'll take the question on SMB. This is a segment that's been growing really nicely for us, but there's just still thousands and thousands of SMBs globally that aren't yet on our platform. We continue to acquire into this channel, and obviously Shopify is a partnership that allows us to do that. We'll be doing some joint marketing efforts to accelerate the acquisition now that we have the capability to sync in catalog and have CAPI integrated into Shopify automatically from Shopify merchants. We'll really be ramping up that co-marketing effort. The second is the onboarding to SMB today is not the optimal onboarding with Max. We're still doing the foundational work on what is the right entry point for SMB that takes out more friction, that is more tailored to their needs, and that allows them to onboard and join Max faster. That's to come, that's ahead of us, but we think that that'll be really important for unleashing smoother acquisition, ramping of acquisition, as well as a great experience faster on our platform. Those are the things that we have in the hopper against SMBs. Obviously, SMBs also benefit from all the horizontal work we do, generally making all of our objectives more efficient. Everyone benefits from that. I feel really good about the momentum in our SMB business. I think there's a little more tailored product work that we want to do for this customer set.

On the creator ecosystem, there's a lot of progress that we made in this quarter. Posts per logged in DAU, comments per logged in DAU, globally and in the U.S. are all up, as is thriving communities. There's a lot of work behind this. We've got a new post composer on both mobile and web, so it's easier to post. New comment composer. We're better directing users to which subreddit they will be successful posting in, making better community recommendations. We're also working on what I think is one of the biggest opportunities, which is post success. Making it easier and more consistent for new users. One of the challenges right now is new users are likely to have their posts removed because their account isn't old enough. These are kind of long-standing strategies that have not aged well. Using LLM-assisted moderation, we can help bring in the prospective great user and continually get better at keeping the spammers and other bad behaviors out. Video and comments is a new feature. That's already more than 10% of our video posts is from that feature. We're seeing nice engagement there as well. I do think our creator ecosystem will look different than what you see on other platforms. The way I've often described it is the social media platforms are for the 1% of creators, and Reddit is for everybody else. Our view is that everybody has something interesting to say, even if you're not a professional content creator. Everybody has a question, everybody has a need, everybody has a bit of advice to give or something interesting to share, and that is what Reddit is for. I think of social media, it's a lot of professional content creators, and Reddit is for everybody else. Making Reddit easier to post to and increasing the post success rate for everybody is the name of the game for us. We made some nice progress this quarter.

Our next question comes from Benjamin Black from Deutsche Bank.

Great. Thank you for taking my questions. Just a follow-up on marketing spend. It does appear, just given the ARPU that you're generating per user, that the ROI on that spend should be quite attractive. I guess the question really is, why not spend more? What are you seeing in terms of the retentiveness of the users that you're bringing through some of these paid channels, and what can you do to improve it? Then, Drew, incremental margins have remained exceptionally strong. As the company continues to scale, where do you see the largest remaining opportunity for operating leverage over the next few years? Thank you.

Good. Let me take that one. On the marketing side, we think that marketing is a very important piece to get to our bold goals. That's really important. We certainly want to continue to do user acquisition spending. I spent a minute talking to Justin about what our model is. Pretty straightforward model. It's very similar to other folks in the industry. The key unlocker there is we just need better user retention. As Steve said, we're up 50% this quarter. That's starting to speak to the product work, but there's still more work to do. On a relative basis, we're lower than others in the space, we're going to continue to try at it. I would say on the marketing side, we did also launch our People Are the Best campaign this quarter. That really shook some things up. We got a lot of positive press from that, the more that we can balance the user acquisition spending with brand spending, we'll end up in better place. Overall, we're committed to the spend in the marketing area. We think the brand will benefit from it. We'd like to continue to invest through it. There's dialogues about how do we maybe spend a little bit more on the brand. Overall, the real unlocker on just getting more UA spending would be just better retention. It is that simple. We have a great model from a gross margin perspective, so an incremental user here is worth a lot. You're pointing out the ARPU. It's very high. Those are two things that are terrific here. They should really help us. We just need a little bit more from the retention, we could really move on this one. Your second question was around the incremental margins. You're right. We've been running incremental margins in the high 50s, low 60s for the better part of a couple of years. The incremental margins here are powerful. We don't manage the business for incremental margins. We look at individual ROI on investments. We continue to be very fortunate with the incremental flow through here. When we get incremental revenues, you really can, particularly on the gross margin line, you can flow those between 95% and 99%. That's how I really think about incrementality. It's just a question of what investments that you want to make. Right now we make the investments that we want to make. We don't hold investments back because we say, "We need the incremental margins here to stay in the high 50s." That's not the way the company runs. We really look at individual investments. Where it makes sense, we put the money behind it, we go ahead and do that. We've had a lot of success with our investments. We've invested a lot in the ad tech stack. You can see that results in the monetization. We've invested a lot in our sales team. You can see eight quarters in a row of 60% or more. Those have been two of our probably more prominent investments. As Steve mentioned, we're investing a lot on the talent side to bring in machine learning talent and really just upgrading our growth team in a meaningful way. Those are investments we make. We make those investments because it's right. I do think the margins continue to accrete here. The long-term goal is 50%, that's what we're focused on right now, I think most of that will come from just leverage for off of incremental revenues. There aren't huge pockets of costs that we're sort of staring at right now and say we could take that out. That would be my take on your question.

Julianne, I think we have time for one last question.

Our last question today will come from Jason Helfstein from Oppenheimer.

Thanks for squeezing me in. I'll just ask one. You're obviously calling out the importance of, we'll call, a high-quality user, app user, logged in. There's probably a lot of different ways you think about a high-quality user. Is the takeaway that you want us to view here is while you may be hurt by referral traffic, that is a high-quality user worth, I don't know, multiples of, let's say, what a one referral traffic? It's not necessarily equal, while The Street is focused on, okay, you're down 300,000 DAU sequentially U.S., the idea that you can offset that over time with your mix of higher quality user. Maybe just elaborate more how you want us to think about the importance of a high-quality user and maybe other metrics we'll share about that in the future. Thanks.

Thanks, Jason. I think you've got it exactly right. The direct users, the app users are worth multiples more than the search referral traffic. We're not building Reddit for that drive-by traffic. We're building Reddit for direct usage, and that's where our business lives, and you can see that in the performance of our ads business. Despite search volatility, and we've seen volatility like this many times in the past, our revenue growth has been very strong and consistent. It's because our business lives with those direct repeat users, and growing that base. Both through our conversion efforts and retention efforts, I think we've made nice progress this quarter. That's the work that we can control, regardless of what happens in the broader search ecosystem. All right. I think that covers it. Thanks, everyone. We appreciate you joining and look forward to speaking again soon.

This concludes Reddit's Q2 2026 earnings call. You may now disconnect.