Reddit's revenue growth driven by ARPU, offsetting user slowdown with strong earnings leverage.

Reddit's recent growth is increasingly fueled by higher average revenue per user (ARPU) rather than an increase in daily active users (DAU). Despite a slowdown in user growth, the platform's monetization efforts have more than compensated, resulting in strong incremental EBITDA margins near 60%, indicating efficient operating leverage. The first quarter earnings highlight the sustainability of ARPU amid challenges like a weaker user mix and risks from external traffic sources. However, structural risks remain from AI-driven content access changes and shifts in Google search, though continued monetization success could still drive upside potential for Reddit.