Reddit, Inc. Class A Common Stock

Company Overview

Business Model: Reddit, Inc. operates a global, digital platform centered on communities (subreddits) where users engage in authentic conversations, share knowledge, explore interests, and exchange information. The core value proposition is empowering communities and making their knowledge accessible to everyone, fostering a sense of belonging and authenticity. Primary revenue generation mechanisms include advertising on its mobile applications and website, and increasingly, content licensing.

Market Position: Reddit, Inc. positions itself as a "global, digital city" with over 100,000 active communities. As of December 31, 2025, the platform hosted over two billion posts and over 22 billion comments, establishing itself as one of the internet’s largest corpuses of human-generated information. It is noted as a significant source for AI training and large language models. The platform differentiates itself through interest-based communities rather than social connections, fostering trusted, authentic recommendations and content curated by users through an upvoting/downvoting system.

Recent Strategic Developments:

• AI and Machine Learning Integration: Reddit, Inc. is actively integrating AI and large language models (LLMs) to enhance user experience, including intuitive onboarding, content classification, and customized content recommendations. Key initiatives include Reddit Community Intelligence, Reddit Insights (AI-powered social listening), Conversation Summary Add-ons (AI-leveraged positive conversations below ads), and Reddit Answers (AI-powered conversational search tool integrated into core search, rolling out to non-English languages).
• International Expansion: Focused on growing its user base outside the United States and in non-English languages. Machine translation is live in 35 languages, with approximately one billion posts translated. A local content framework is used to identify top interests in each country, successfully applied in India and now expanding globally.
• Advertiser Tools and Offerings: Launched Reddit Pro tools for publishers (e.g., The Atlantic, The Hill, NBC News, The Associated Press) to share and track content, and use AI-powered tools for community targeting. Expanded access to conversation summary add-ons for advertisers. Introduced a limited test of verified profiles for individuals and businesses.
• Monetization Expansion: Exploring new revenue streams beyond advertising, such as content licensing agreements with marketing intelligence, enterprise-scale technology, and financial services companies, and Reddit’s earnings programs for contributors, developers, and creators.
• Automated Advertising Campaigns: Introduced a beta version of Max campaigns in January 2026, an AI-powered automated campaign type that optimizes campaign settings in real-time for better performance.

Geographic Footprint: Reddit, Inc. operates globally. For the three months ended December 31, 2025, approximately 57% of Redditors visited the platform from outside the United States. The company's headquarters are in San Francisco, California, with additional offices in the United States (New York, Chicago, Los Angeles) and internationally (London).

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 91.2% (2025) vs. 90.5% (2024)
• Operating Margin: 20.1% (2025) vs. -43.1% (2024)
• Net Margin: 24.0% (2025) vs. -37.2% (2024)

Investment in Growth:

• R&D Expenditure: $783.1 million (35.6% of revenue) in 2025.
• Capital Expenditures: $6.7 million in 2025.
• Strategic Investments: In 2024, Reddit, Inc. completed an acquisition for $19.9 million ($17.1 million cash, $2.8 million equity) to enhance technology and workforce. No specific strategic investment amounts were disclosed for 2025 beyond R&D.

Business Segment Analysis

Reddit, Inc. operates as a single operating segment. Its Chief Executive Officer, as the chief operating decision maker, evaluates performance and allocates resources based on consolidated financial data.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: On February 4, 2026, the Board of Directors authorized a share repurchase program of up to $1.0 billion of Class A common stock. No shares were repurchased during the three months ended December 31, 2025.
• Dividend Payments: Reddit, Inc. has never declared or paid cash dividends and does not anticipate paying any in the foreseeable future.
• Dividend Yield: Not applicable.
• Future Capital Return Commitments: A $1.0 billion share repurchase program for Class A common stock was authorized in February 2026.

Balance Sheet Position:

• Cash and Equivalents: $953.6 million as of December 31, 2025.
• Total Debt: No outstanding borrowings under the Revolving Credit Facility as of December 31, 2025.
• Net Cash Position: $2,476.8 million (Cash and Equivalents of $953.6 million + Marketable Securities of $1,523.2 million) as of December 31, 2025.
• Credit Rating: Not disclosed.
• Debt Maturity Profile: Revolving Credit Facility of $500.0 million is accessible through July 1, 2030.

Cash Flow Generation:

• Operating Cash Flow: $690.9 million in 2025.
• Free Cash Flow: $684.2 million in 2025.
• Cash Conversion Metrics: Not explicitly detailed in the filing.

Operational Excellence

Production & Service Model: Reddit, Inc. operates a user-powered platform where communities self-organize and are moderated by volunteers. The platform provides a "flexible canvas" for expression through various content formats (text, image, video, opinion polls, chatrooms) and offers creative tools for moderators to customize community look and feel. An open application programming interface (API) allows developers to build bots and features. Content moderation is layered, combining site-wide Reddit Rules with community-specific norms, with human review of content that gains traction.

Supply Chain Architecture: Key Suppliers & Partners:

• Hosting Providers: Amazon Web Services and Google Cloud Platform are the primary cloud service providers.
• Technology Partners: IAS (for 3P proactive brand safety controls and post-campaign reporting) and DV (for post-campaign reporting across brand safety, viewability, and invalid traffic).

Facility Network:

• Headquarters: San Francisco, California (approximately 48,000 square feet, lease expires 2029).
• Offices: Additional offices in New York, Chicago, Los Angeles, and London.
• Workplace Philosophy: Flexible work policy supporting remote and in-office work, aimed at attracting and retaining top talent.

Operational Metrics: Not explicitly detailed beyond user metrics (DAUq, WAUq) and financial performance.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Utilizes an advertising platform for marketers to reach relevant audiences using interest graphs and contextual targeting.
• Channel Partners: Engages channel partners and vendors to manage small- and mid-size businesses globally.
• Digital Platforms: Relies on its website (www.reddit.com) and mobile applications for user access and content delivery.

Customer Portfolio: Enterprise Customers: Engages with large agencies and aims to grow advertisers from endemic verticals (technology, communications, business, legal, finance, media, entertainment) to newer verticals (automotive, retail, consumer packaged goods, pharmaceuticals, food and beverage). Strategic Partnerships: Collaborates with media outlets like The Atlantic, The Hill, NBC News, and The Associated Press through Reddit Pro tools to share and track content. Customer Concentration: The top ten largest advertisers accounted for approximately 21% of total revenue in 2025. No single customer represented 10% or more of total revenue.

Geographic Revenue Distribution:

• United States: $1,785.6 million (81.1% of total revenue) in 2025.
• Rest of world: $417.0 million (18.9% of total revenue) in 2025.
• Growth Markets: Actively expanding in geographies outside the United States, with initiatives like machine translation and local content frameworks (e.g., India).

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: Reddit, Inc. operates in a highly competitive and rapidly changing environment, vying for both user time and global advertising spend. The company highlights its position as one of the internet's largest repositories of human conversation and knowledge, which is increasingly valuable for training AI and large language models.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• For Seeking Information: Google, Amazon, YouTube, Wikipedia, X, and large language models (LLMs) such as ChatGPT, Gemini, and Anthropic.
• For Entertainment: Meta (including Facebook, Instagram, Threads, and WhatsApp), YouTube, Snap, X, TikTok, Roblox, and Twitch.
• For Passions and Hobbies: Facebook Groups, Discord, X, and Pinterest.
• For Peer-to-peer Commerce: Facebook Marketplace, Nextdoor, Craigslist, Poshmark, Etsy, and Roblox.
• For Advertising Spend: Google, Meta, Snapchat, TikTok, Pinterest, and X.

Emerging Competitive Threats: The rise of LLMs and other AI models that retrieve and synthesize information poses a threat, as users may opt for AI tools instead of directly visiting Reddit, even if these tools were trained on Reddit content. New entrants and disruptive technologies are also ongoing threats.

Competitive Response Strategy: Reddit, Inc.'s strategy includes continuous product evolution, significant investment in AI and machine learning, expanding its international user base, diversifying its advertiser base, improving ad measurement tools, and exploring new revenue streams like content licensing.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• User Growth & Engagement: Failure to increase or retain daily active uniques (DAUq) or declining user engagement, particularly converting weekly/monthly users to daily users, could harm the business. Past growth has fluctuated, with peaks around global events and declines as effects subsided.
• Content Contribution: Dependence on Redditors to contribute valuable and appealing content; a decline in contributions or loss of prolific/influential Redditors could reduce user engagement and advertiser appeal.
• Brand & Reputation: Damage from offensive, inappropriate, or objectionable content, actions by bad actors, negative media coverage, or failure to meet user/moderator expectations regarding content moderation.
• Search Engine Algorithms: Changes in internet search engine algorithms (e.g., Google) could negatively impact organic traffic to Reddit's website, especially if machine-generated content (like translations) is deprioritized.
• Macroeconomic Environment: Uncertainty in the advertising market due to inflation, rising interest rates, tariffs, and geopolitical risks (e.g., conflicts in Ukraine and the Middle East) could impact revenue growth. Technology Disruption:
• AI/LLM Competition: LLMs and other AI models (e.g., Google, Meta, OpenAI, Anthropic) could draw users away from Reddit for information seeking, potentially reducing direct platform visits.
• Innovation Pace: Inability to effectively adopt new AI/ML technologies or secure specialized resources (e.g., graphical processing units) could impair competitiveness. Customer Concentration:
• Advertiser Dependency: A substantial portion of revenue (21% in 2025) is derived from the top ten largest advertisers, posing a risk if these relationships deteriorate or budgets are reduced.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Heavy reliance on Amazon Web Services and Google Cloud Platform for hosting, with potential for service interruptions, delays, or outages, and challenges in transitioning to alternative providers.
• Geographic Concentration: Not explicitly stated as a risk, but operational challenges and regulatory compliance risks increase with international expansion.
• Capacity Constraints: Difficulty in scaling technology and infrastructure to reliably store, serve, and analyze increasing user-generated content and traffic, especially internationally. Platform Integrity:
• Platform Manipulation: Exposure to sophisticated attempts by bad actors to manipulate systems (e.g., bots, spam, coordinated information manipulation), which can degrade service quality and undermine monetization systems.
• Content Moderation: Reliance on volunteer moderators, potential for inconsistent rule application, controversial decisions, inability to retain sufficient moderators, or disruptive actions by moderators (e.g., API policy changes in 2023). Software & Interoperability:
• Software Errors: Undetected software errors, bugs, or vulnerabilities in complex software, including open source and AI/ML systems, could lead to negative user experiences, data breaches, or service disruptions.
• Third-Party Interoperability: Dependence on external ecosystems (operating systems, app stores, web browsers like Apple, Microsoft, Google) and their policies; changes could impact accessibility, functionality, or preferential treatment of competitors.

Financial & Regulatory Risks

Market & Financial Risks:

• Profitability: History of net losses (accumulated deficit of $(671.1) million as of Dec 31, 2025), with no assurance of sustained profitability despite recent net income.
• Revenue Volatility: Quarterly results fluctuate due to seasonality (Q4 strongest, Q1 weaker) and external macroeconomic factors.
• Monetization Challenges: Early stage of monetization efforts, no assurance of scaling advertising revenue, attracting new advertisers, or successfully identifying non-advertising revenue streams. ARPU growth may be lower in international markets.
• Capital Needs: Potential need for additional capital for growth, which may not be available on favorable terms or could dilute existing stockholders. Regulatory & Compliance Risks:
• Evolving Regulations: Subject to increasingly complex and evolving U.S. and foreign laws regarding content, privacy, data protection, intellectual property, advertising, AI/ML, consumer protection, and protection of minors (e.g., Section 230 scrutiny, EU DSA, UK Online Safety Act, EU AI Act).
• Content Liability: Increased legal complexity and potential liability for third-party content or content moderation decisions, especially in jurisdictions outside the U.S.
• New Business Initiatives: Virtual goods, NFTs, and content licensing for AI purposes are novel and subject to unclear or evolving regulations (e.g., potential classification as securities, data privacy inquiries). Legal Proceedings:
• Litigation Exposure: Currently involved in a securities class action lawsuit and shareholder derivative complaints related to the impact of Google Search and AI Overviews, and may face other claims (IP infringement, privacy, etc.).

Geopolitical & External Risks

Geopolitical Exposure:

• Regional Conflicts: Geopolitical tensions (e.g., Russia-Ukraine, Middle East) and trade restrictions could broadly impact business, vendors, partners, and the economy.
• Geographic Dependencies: Concentration of offices and employees in the San Francisco Bay Area exposes the company to seismic activity. Trade Relations:
• Export Controls & Sanctions: Subject to U.S. and EU export control and economic sanctions laws, with risks of non-compliance leading to penalties and reputational harm.

Innovation & Technology Leadership

Research & Development Focus: Reddit, Inc. is heavily focused on integrating artificial intelligence (AI) and large language models (LLMs) across its platform. Core Technology Areas:

• AI/LLM: Utilized for improving user onboarding, content classification, customized content recommendations, and enhancing search capabilities (Reddit Answers).
• Advertising Technology: Leveraging AI/ML for contextual and interest-based advertising, marketplace optimizations, audience reach, bidding (Max campaigns), and expanded ad formats like Dynamic Product Ads.
• Machine Translation: Key to international expansion, with machine translation live in 35 languages. Innovation Pipeline:
• Reddit Answers: AI-powered conversational search tool being integrated into the core search experience and rolled out to non-English languages.
• Max Campaigns: Beta version of an automated, AI-powered campaign type for advertisers, optimizing campaign settings in real-time.
• Dynamic Product Ads: A shopping solution allowing advertisers to create ads directly from product catalogs.
• Interactive Ads: Development of interactive ad experiences on the developer platform. Intellectual Property Portfolio:
• Patent Strategy: Holds several pending utility patent applications in the United States.
• Trademark Strategy: Approximately 400 trademark registrations and pending applications globally.
• Copyright Strategy: Over 120 copyright registrations on graphical designs and literary works.
• Trade Secrets: Relies on trade secret laws, internal security controls, and confidentiality agreements. Licensing Programs: Strategically exploring content licensing agreements with partners in marketing intelligence, enterprise-scale technology, and financial services, recognizing Reddit's content as a valuable data source for AI and LLM training. IP Litigation: Has commenced litigation against companies using Reddit content for LLM training without a license. Technology Partnerships: Collaborates with IAS and DV for brand safety, viewability, and invalid traffic reporting in advertising.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The company's success is dependent on its senior management team, particularly Steven Huffman. The loss of key employees could disrupt operations.

Board Composition: Advance Magazine Publishers Inc. (a principal stockholder) has the right to designate two directors and one nonvoting board observer. Any increase in the Board of Directors beyond ten members requires Advance's prior written approval.

Governance Structure: Reddit, Inc. has a multi-class common stock structure: Class B common stock (10 votes per share), Class A common stock (1 vote per share), and Class C common stock (no votes per share). Steven Huffman, through voting agreements with Advance and Tencent Cloud Europe B.V. and Jojoba Investment Limited, controls approximately 75% of the voting power as of December 31, 2025. This concentrated control limits other stockholders' influence on corporate matters. Advance also holds approval rights over certain corporate actions, including new securities issuances, M&A, CEO termination, and charter amendments. Reddit, Inc. is eligible to be a "controlled company" under NYSE rules but does not currently avail itself of the exemptions.

Human Capital Strategy

Workforce Composition:

• Total Employees: 2,555 as of December 31, 2025, up from 2,233 in 2024.
• Geographic Distribution: 1,981 employees in the United States as of December 31, 2025.
• Skill Mix: Not explicitly detailed, but emphasis on engineers and other employees engaged in R&D, sales, marketing, finance, legal, HR, and IT.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Focus on attracting and retaining high-quality personnel with diverse backgrounds, experiences, and skill sets in various functions.
• Retention Metrics: Not explicitly detailed, but the company uses an equity incentive program and competitive compensation.
• Employee Value Proposition: Cultivates a "fun, quirky" and authentic work culture, supported by Employee Resource Groups (ERGs) for various demographics (veterans, BIPOC, LGBTQ+, abilities, women, allies) and informal gatherings. Offers a flexible work policy (remote/office). Diversity & Development:
• Diversity Metrics: Not explicitly detailed, but ERGs support diverse employee groups.
• Development Programs: Not explicitly detailed.
• Culture & Engagement: Guided by values: "Reddit’s Mission First," "Add Value," "Play to Win," and "Evolve."

Environmental & Social Impact

Environmental Commitments: Not explicitly detailed in the filing.

Supply Chain Sustainability: Not explicitly detailed in the filing.

Social Impact Initiatives: Reddit, Inc.'s mission is to empower communities and make their knowledge accessible to everyone. This mission inherently drives social impact by fostering belonging and open discourse. The company's content moderation approach, which combines site-wide rules (e.g., against harassment, bullying, violence, hate speech) with community-specific norms, aims to create safe and vibrant online spaces.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Reddit, Inc. has historically observed seasonality in its business and financial results. The fourth quarter typically sees an increase in overall advertiser spending due to end-of-year budgets, followed by a weaker first quarter.
• Economic Sensitivity: The business is impacted by global economic and macroeconomic conditions, including inflation, rising interest rates, tariffs, and geopolitical risks, which can affect advertising market uncertainty and brands' willingness to invest.
• Industry Cycles: Not explicitly detailed beyond general economic sensitivity.

Planning & Forecasting: The company acknowledges the unpredictability of macroeconomic conditions and their impact on future performance, indicating that past results may not be indicative of future performance.

Regulatory Environment & Compliance

Regulatory Framework: Reddit, Inc. is subject to a complex and evolving landscape of U.S. federal and state, and foreign laws, rules, and regulations. These cover areas such as privacy, data protection, content regulation, intellectual property, advertising, machine learning and AI, consumer protection, and protection of minors. Industry-Specific Regulations:

• Content Regulation: Faces scrutiny and claims related to defamation, misinformation, discrimination, harassment, hate speech, online safety, and sex trafficking. Legislative efforts in the U.S. (e.g., Section 230 of the Communications Decency Act) and internationally (e.g., Germany, India, Brazil, EU Copyright Directive, Dutch Media Act, UK/Australia Online Safety Acts, EU ePrivacy Directive, EU Digital Services Act, Social Media Minimum Age law in Australia, Digital Majority Act in France) impose varying obligations and penalties for content removal and platform liability.
• Adult Content: Subject to regulations limiting minors' access to online content and U.S. laws (18 U.S.C. Section 2257) regarding adult content recordkeeping and labeling.
• Commerce & Virtual Goods: New initiatives involving virtual goods, rewards, and blockchain technology (e.g., Reddit Collectible Avatars) may be subject to laws governing money laundering, securities, consumer protection, and virtual currency.
• AI Regulation: The use of machine learning and generative AI is subject to increasing scrutiny and regulation, such as the EU AI Act (effective August 2024), which imposes requirements on transparency, risk assessments, and human oversight. International Compliance: Foreign data protection and content regulation laws are often more restrictive, and governments may seek to block or limit Reddit's products. Trade & Export Controls: Subject to U.S. and EU export control and economic sanctions laws, prohibiting services to embargoed countries or sanctioned persons. Legal Proceedings: Currently involved in a securities class action lawsuit and shareholder derivative complaints alleging false or misleading statements regarding the impact of Google Search and its AI Overviews feature. Also faces potential IP infringement claims.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: -0.2% in 2025 (benefit), 0.1% in 2024, -4.4% in 2023 (benefit).
• Tax Law Changes: The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, repealed the requirement to capitalize domestic research and experimental expenditures, allowing immediate expensing and resulting in additional taxable losses for Reddit, Inc. Geographic Tax Planning:
• International Tax Structure: Subject to taxation in multiple non-U.S. jurisdictions with complex tax laws.
• Transfer Pricing: Policies account for intercompany transactions, but methodologies may be challenged by taxing authorities. Tax Reform Impact:
• Inflation Reduction Act (IRA): Introduced a corporate minimum tax and an excise tax on certain stock repurchases. Repurchases under the authorized $1 billion program could incur excise tax liability. NOLs:
• Carryforwards: As of December 31, 2025, had $1.7 billion in U.S. federal net operating loss (NOL) carryforwards (indefinite carryforward, 80% taxable income limit) and $806.1 million in state NOL carryforwards (expiring starting 2026).
• Valuation Allowance: A full valuation allowance is recorded against federal and state deferred tax assets due to historical losses. There is a reasonable possibility that a significant portion of the federal valuation allowance may be released within the next 18 months, which would result in a significant income tax benefit.

Insurance & Risk Transfer

Risk Management Framework: Reddit, Inc. maintains a cybersecurity risk management program designed to protect its platform and data. This program includes:

• Risk Assessments: Identifying material cybersecurity risks to critical systems and information.
• Dedicated Security Team: Responsible for managing risk assessments, security controls, and incident response.
• External Service Providers: Utilizes third-party penetration testing firms, bug bounty programs, and auditors.
• Employee Training: Cybersecurity awareness training for employees, incident response personnel, and senior management.
• Incident Response Plan: Follows recognized frameworks (e.g., NIST Cybersecurity Framework) with automated tools for threat triage.
• Third-Party Risk Management: Process for service providers, suppliers, and vendors, including SOC 2 reports and security questionnaires. Insurance Coverage:
• Directors' and Officers' Liability Insurance: Maintained by the company.
• Business Interruption Insurance: Not sufficient to cover potentially significant losses from service interruptions.
• Cybersecurity Insurance: Coverage may not be sufficient to cover all applicable losses from security breaches. Risk Transfer Mechanisms: Not explicitly detailed beyond insurance.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Reddit, Inc. experiences seasonality in its business and financial results. The fourth quarter typically shows an increase in overall advertiser spending, largely due to end-of-year budgets, which is usually followed by a weaker first quarter.
• Economic Sensitivity: The company's revenue growth is impacted by global economic and macroeconomic conditions, including concerns related to inflation, rising interest rates, tariffs, and geopolitical risks, which affect brands' and agencies' willingness to invest in advertising.
• Industry Cycles: Not explicitly detailed beyond general economic sensitivity.

Planning & Forecasting: The company acknowledges the high unpredictability of the duration and degree of volatility from macroeconomic conditions, stating that past results may not be indicative of future performance.

Regulatory Environment & Compliance

Regulatory Framework: Reddit, Inc. is subject to a wide array of stringent, evolving, and complex U.S. federal and state, and foreign laws, rules, and regulations. These cover critical aspects of its business, including content, intellectual property, rights of publicity, data privacy and security, advertising, machine learning and AI, marketing, distribution, competition, consumer protection, protection of minors, telecommunications, product liability, taxation, economic or other trade prohibitions or sanctions, blockchain, and securities laws. Industry-Specific Regulations:

• Content Regulation: Faces ongoing claims and governmental scrutiny related to defamation, misinformation, discrimination, harassment, intellectual property rights, online safety, and sex trafficking. Legislative efforts in the U.S. (e.g., Section 230 of the Communications Decency Act) and internationally (e.g., Germany, India, Brazil, EU Copyright Directive, Dutch Media Act, UK/Australia Online Safety Acts, EU ePrivacy Directive, EU Digital Services Act, Social Media Minimum Age law in Australia, Digital Majority Act in France) are expanding online platform liability and imposing new obligations.
• Adult Content: Existing and future regulation of adult content could restrict availability in certain jurisdictions and impact business.
• Commerce & Virtual Goods: Initiatives involving virtual goods and rewards may be subject to laws governing money laundering, securities, consumer protection, and virtual currency.
• AI Regulation: The use of machine learning and generative AI is subject to increasing litigation and regulatory scrutiny, with frameworks like the EU AI Act (effective August 2024) imposing requirements on transparency, risk assessments, and human oversight. International Compliance: Foreign data protection, privacy, and content regulation laws are often more restrictive, and some governments may seek to block or limit Reddit's products. Trade & Export Controls: Subject to U.S. and EU export control laws and economic sanctions, which prohibit providing certain products and services to embargoed or sanctioned countries, governments, and persons. Legal Proceedings: Currently involved in a securities class action lawsuit and shareholder derivative complaints alleging false or misleading statements regarding the impact of Google Search and its AI Overviews feature. The company may also face claims for infringing third-party intellectual property rights.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: Reddit, Inc.'s effective tax rate was -0.2% (benefit) in 2025, 0.1% in 2024, and -4.4% (benefit) in 2023.
• Tax Law Changes: The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, repealed the requirement to capitalize domestic research and experimental expenditures under the 2017 Tax Cuts and Jobs Act, allowing for immediate expensing of these costs. This change resulted in additional taxable losses for the company in 2025. Geographic Tax Planning:
• International Tax Structure: The company is subject to taxation in several non-U.S. jurisdictions with increasingly complex tax laws.
• Transfer Pricing: Reddit, Inc.'s transfer pricing policies account for functions, risks, and assets in intercompany transactions, but these methodologies may be challenged by taxing authorities. Tax Reform Impact:
• Inflation Reduction Act (IRA): The IRA introduced a corporate minimum tax and an excise tax on certain stock repurchases. Repurchases under the $1.0 billion share repurchase program authorized in February 2026 could result in an excise tax liability. Net Operating Loss (NOL) Carryforwards:
• Federal NOLs: As of December 31, 2025, Reddit, Inc. had approximately $1.7 billion in U.S. federal NOL carryforwards, which can be carried forward indefinitely but are limited to offsetting 80% of annual taxable income.
• State NOLs: Approximately $806.1 million in state NOL carryforwards were available as of December 31, 2025, with expirations beginning in 2026.
• Valuation Allowance: A full valuation allowance is recorded against federal and state deferred tax assets due to the company's history of losses. However, given recent net income generation in the United States, there is a reasonable possibility that a significant portion of the federal valuation allowance may be released within the next 18 months, which would result in a significant income tax benefit.

Insurance & Risk Transfer

Risk Management Framework: Reddit, Inc. maintains a comprehensive cybersecurity risk management program. This program includes:

• Risk Assessments: Designed to identify material cybersecurity risks to critical systems, information, products, and services.
• Dedicated Security Team: A dedicated security team, led by Chief Information Security Officer Fredrick Lee (over 20 years of experience), is responsible for managing risk assessments, security controls, and incident response.
• External Providers: Utilizes third-party penetration testing firms, bug bounty programs, and auditors to assess and test security controls.
• Employee Training: Conducts cybersecurity awareness training for employees, incident response personnel, and senior management.
• Incident Response Plan: Features a cybersecurity incident response plan that follows recognized frameworks (e.g., NIST Cybersecurity Framework) and is supported by automated tools.
• Third-Party Risk Management: Implements a process for service providers, suppliers, and vendors, incorporating evaluations like SOC 2 reports and annual security reviews. Insurance Coverage:
• Directors' and Officers' Liability Insurance: The company has obtained directors' and officers' liability insurance policies.
• Business Interruption Insurance: Reddit, Inc. does not carry business interruption insurance sufficient to compensate for potentially significant losses from service interruptions.
• Cybersecurity Insurance: While the company has cybersecurity insurance, there is no guarantee that coverage would be sufficient for all applicable losses. Risk Transfer Mechanisms: Not explicitly detailed beyond insurance policies.