RDDT

Reddit's FY2025 is a genuine inflection, not a cosmetic one. Revenue grew 69.4% to $2.20B while operating expenses actually *fell* ($1.6B vs $1.7B per MD&A) — that operating leverage drove net income from -$484M to +$530M (+209%), a 24.1% net margin and 20.1% operating margin off a 91.2% gross margin. This is the rare growth story where the cash backs up the GAAP: $691M operating cash flow (+211%), $684M free cash flow, and $845M adjusted EBITDA. The balance sheet is a fortress — $2.93B equity against just $310M total liabilities (0.11x liabilities/equity), $954M cash (MD&A cites $2.5B including marketable securities), and capex of only $6.7M, so growth is essentially self-funding. ROE of 18.1% understates returns since the equity base is freshly built. The engagement engine is intact: DAUq +19% to 121.4M and ARPU +42% to $5.98, meaning monetization is accelerating faster than the user base — the highest-quality kind of revenue growth.

Valuation is the obvious objection: at $174.96 the stock trades at 66.8x FY diluted EPS of $2.62, and it's up 5.4% today. That is rich in absolute terms. But against ~69% revenue growth, ~179% EPS growth and still-early monetization (the company explicitly says it is 'in the early stages of monetizing'), the growth-adjusted multiple is far less stretched than the headline P/E suggests, and the margin trajectory means forward earnings should compress that multiple quickly. Reddit screens as a high-quality compounder at a full — not absurd — price.