Reddit, Inc. (RDDT) shares fell 3.79% to $129.60 at the market close before plunging another 16.67% to $108.00 in after-hours trading, even as the company reported third-quarter 2026 results highlighted by 53% revenue growth to $895 million, a 74% rise in net income to $283 million, and free cash flow that nearly doubled from a year earlier.

The after-hours sell-off extended the regular-session decline, leaving the stock lower despite improvements across several key financial measures. The drop also followed a notable corporate milestone for the company: its addition to the S&P 500.

Revenue Climbs 53% as Advertising Drives Growth

Reddit reported $895 million in third-quarter revenue, a 53% increase from $585 million a year earlier. Net income rose 74% to $283 million, compared with $163 million in the same period of 2025. Despite these gains, the stock declined sharply once regular trading ended, and the losses deepened in after-hours dealings.

Advertising remained the engine of the business. The company generated $847 million in advertising revenue during the quarter, up 54% year over year, while other revenue increased 35% to $48 million. Advertising accounted for the overwhelming majority of Reddit's total quarterly sales. With $847 million of $895 million in total revenue — roughly 95% of quarterly sales — the company's overall results remain closely tied to advertising demand, while the faster-growing other revenue category still represents a comparatively small slice of the business.

Geographically, international revenue climbed 67% to $176 million, outpacing the 50% increase recorded in the United States. The U.S. contributed $719 million, accounting for most of Reddit's quarterly sales. Based on the reported figures, international sales now make up roughly one-fifth of quarterly revenue, up from about 18% in the prior-year period, a measurable shift in the geographic mix of Reddit's sales.

Profitability improved as well. Gross margin reached 91.5%, up from 91.0% in the prior-year quarter. Diluted earnings per share increased 75% to $1.40, compared with $0.80 a year earlier, while basic earnings per share climbed 69% to $1.47, reflecting stronger profitability during the quarter.

Cash Flow Nearly Doubles; Buyback Continues

Adjusted EBITDA came in at $402 million, an increase of 70% from $236 million in the prior-year quarter. As a result, the adjusted EBITDA margin improved to 44.9% from 40.3% in 2025, reflecting higher earnings alongside continued revenue expansion across the platform's business.

Cash generation strengthened considerably. Operating cash flow rose to $364 million from $185 million, growth of approximately 96% year over year, while free cash flow nearly doubled to $363 million from $183 million in the same period last year. Capital expenditures totaled just $1 million, equivalent to 0.1% of quarterly revenue. With capex that small, essentially all of the quarter's operating cash flow translated into free cash flow, underscoring the capital-light character of Reddit's business model.

The balance sheet also remained robust. Reddit ended September with $3.03 billion in cash, cash equivalents, and marketable securities. Fully diluted shares outstanding totaled 206.3 million, down 0.3% from the previous quarter. The company also repurchased approximately 670,000 Class A shares for $100 million at an average price of $149.81 per share — a price roughly 39% above the $108.00 level at which the stock traded after hours.

S&P 500 Inclusion Highlights the Quarter

Reddit's addition to the S&P 500 stood out as a significant development during the period. The S&P 500 is a widely followed benchmark of large United States companies whose constituent shares are held by index-tracking funds. The inclusion highlighted the company's position among major publicly traded United States companies following its financial and business growth. Even so, the latest share-price decline showed that strong quarterly figures did not prevent selling pressure once the results were released.

Strong Results, Sharp Market Reaction

The advertising business again served as the primary revenue driver, contributing $847 million to total quarterly sales. International revenue growth outpaced domestic growth, indicating broader expansion beyond the United States market. Higher net income, improved margins, and stronger cash generation further reinforced the company's reported financial performance.

Despite those positive figures, RDDT fell from its $129.60 closing price to $108.00 in after-hours trading, an additional decline of 16.67% following the regular-session loss of 3.79%.

Reddit's third-quarter report therefore presented a clear contrast between substantial financial growth across revenue, profit, and cash flow, and a sharply negative reaction in the market. The distance between the quarter's reported fundamentals and the market's response now forms the backdrop against which the company's next quarterly disclosures will be read.