QS Research · Michael Burry's Scion Capital analyst template · 2006
Reddit, Inc. (RDDT)
As of 2026-11-05 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case +5% · downside -20% · upside +29%
The market is treating the Q3 2026 Google-referral warning as permanent impairment, but on the TTM to 2026-09-30 Reddit still shows $3.09B revenue, $908.0M EBIT, $1.20B FCF and ~$1.34B net cash (N7, N8, N13, N14). I use section 13's TTM base: at 20x TTM EBITDA of $924.9M plus $1.34B net cash over 201.86M shares, value is ~$98 (+4.8%); 15x gives ~$75 (-19.7%), and 25x gives ~$121 (+29.2%) (N9, N14, N15, N4). That is not enough margin of safety for a business whose U.S. DAU fell 2% y/y and whose Q4 guide implies low-double-digit sequential DAU declines, while the stock is still 19.0x EV/EBITDA (N19, S28, S56). The long rule is not met because the base case is only +4.8%, so this is a watch until DAU/search referrals stabilize or the price gives a >30% base-case return.
Key numbers
- Share price: $93.81
- Market cap: $18.94B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $3.09B
- EV / EBITDA (TTM): 19.0x
- P/E (TTM): 19.1x
- Price / book: 5.29x
The 15 boxes
- ✓ 1. Long-form business notes
Reddit is a two-line advertising and data-licensing business built on free user-generated communities: FY2025 revenue was $2.20B against $666.7M in FY2022, and operating income turned to $442.0M in FY2025 from a $560.6M operating loss in FY2024 (S24). The model is asset-light (FY2025 capex $6.7M versus operating cash flow $690.9M) and audience-driven: 121.4M average DAUq and 471.6M WAUq in Q4 2025 versus 101.7M and 379.4M in Q4 2024. Between the FY2024 and FY2025 10-Ks the pitch shifted from user-economy experiments (Contributor Program) to AI-era data value, search, and international expansion.
- ✓ 2. Competitive advantage
Sources show Reddit competing for time and ad dollars against Google, Meta, TikTok, Snap, Pinterest, X and others, several with greater financial resources and larger user bases. The company cites brand/reputation and community content as advantages, but it also discloses dependence on a small number of contributors and on search-engine traffic, so the moat is not proven durable. Financial history is losses through FY2024, then FY2025 operating income of $442.0M and operating cash flow of $690.9M on $2.20B revenue.
- ✓ 3. 10-Q takeaways
Q3 2026 revenue grew 53% year-over-year to $895.0 million, with gross margin 91.5%, operating income $261.6 million and Adjusted EBITDA $402.3 million; net income of $283.3 million included $27.5 million of other income, net. Cash generation was strong: Q3 2026 Free Cash Flow was $362.6 million and cash, cash equivalents and marketable securities were $3.0 billion at September 30, 2026, while 9M 2026 buybacks used $340.0 million. User growth decelerated: global DAUq rose 12% but U.S. DAUq fell 2% year-over-year and global DAUq was flat quarter-over-quarter, with new risk disclosures on search-referral volatility and AI.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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