What Are You Really Paying For Reddit’s Ad Growth?

Reddit (RDDT) stock is down about 35% over the past twelve months. Yet at about $155 it still trades at about 26.5 times trailing adjusted earnings, meaning normalized net income with stock-based compensation added back. The forecast that makes Reddit look cheaper does not need wider margins. It needs advertising to keep growing while search referrals stay volatile.

Why Reddit Still Looks Expensive After Its Fall

On Reddit’s Q2 2026 earnings call, one analyst told management the shares fell because investors see a user problem at Reddit, especially in the U.S. The stock is up 13.3% over the last six months but down 9.8% over the last three.

On the earnings analysts expect for 2026, which are defined differently from trailing adjusted earnings, the same price is about 27.4 times. Only on the 2027 estimate does the multiple drop below 25, to about 22.5 times. So the case that Reddit is not expensive leans on the 2027 forecast.

That forecast is far from settled. The 23 analysts covering 2027 put earnings anywhere from $4.42 to $8.73 a share, so the highest estimate is nearly twice the lowest. Any multiple built on their consensus carries that disagreement.

But Reddit Can Slow Down And Still Meet That Forecast

The revenue growth analysts expect sits well below what Reddit is delivering. Consensus has sales growing about 37% a year from the trailing twelve months through 2027. Over the past twelve months revenue grew about 67%, and management guides 47% to 49% growth for Q3 2026 alone.

Nor does the forecast lean on margins. Between the 2026 and 2027 estimates, consensus has earnings growing more slowly than revenue, which assumes Reddit gives some margin back. Management’s own guide covers only Q3 2026, not 2027: an adjusted EBITDA margin of 45% at the midpoint, against 43% on the same measure in Q2 2026.

On paper, then, the forecast is modest. What it rests on is advertising, and advertising needs an audience.

So Can Reddit Keep Selling Ads Faster Than It Adds Users?

So far it has. Average revenue per unique user rose 36% year over year in Q2 2026, and advertising, up 64%, brought in $762 million of Reddit’s $805 million of revenue, about 95% of it. Management attributes that growth to both pricing and impressions.

Revenue from Reddit Max, its automated campaign suite launched in private beta in 2026, grew over 150% from Q1 2026 to Q2 2026, and Dynamic Product Ads revenue more than doubled year over year. Management’s stated aim is to make every impression more valuable, a lever that does not depend on a bigger audience.

The audience is the weaker side. Management says weekly users grew from Q1 2026, but that lost search referrals offset the daily users its product work added, and that the company has little visibility into that traffic.

For the 2027 estimate to land, Reddit’s advertising has to keep growing through whatever search referrals do next. That is the bet a buyer pays for at about 22.5 times 2027 earnings.

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