Reddit vs AppLovin vs Palantir
All three stocks have been undergoing a hypergrowth stage of business. I want to go through each of their business models because many people in this subreddit seem not to really understand what they do, how they make money, and most importantly, what their edge actually is.
| Name | AppLovin | Palantir | |
|---|---|---|---|
| Q2 2026 Revenue | $805M | $1.92B | $1.94B |
| Revenue Growth | 61% | 53% | 93% |
| GAAP Net Income | $253M | $1.27B | ~$1.06B |
| Core Business | Advertising | Performance advertising | Enterprise/Gov software |
| What I like | Community + intent | AXON | Deeply embedded software |
| Main concern | Execution | Algorithm risk | Valuation / competition |
First, let us start with Reddit. Reddit's primary way forward really is the advertising business. This is the core lifeblood of the company, and they have now proven themselves with the 8th consecutive quarter above 60% revenue growth YoY. EPS also grew more than 150% in the recent quarter.
One thing I think many people misunderstand is how advertising actually works. Many people just assume that someone has to purchase the product before the advertiser pays, but that is not how most advertising businesses work. Typical advertising is charged by impression, click, or in some cases actual conversion.
- CPM (Cost Per Mille / 1,000 impressions): advertisers pay for every 1,000 times an ad is shown
- CPC (Cost Per Click): advertisers pay each time someone clicks on the ad
- CPA (Cost Per Acquisition): advertisers pay only when a specific action happens (install, signup, purchase, etc.)
The main models are quite simple. CPM means paying for impressions, CPC means paying when somebody clicks, while CPA is more performance-based and depends on an actual action such as an install, registration or purchase. This difference matters because an advertisement does not necessarily need to immediately convert somebody into a buyer. Sometimes the most valuable thing is simply putting the impression in front of exactly the right person. Converting that impression into a purchase is ultimately the seller's job.
For instance, say you developed a game or have a clothing website. You pay a publisher like Reddit to get users to see your product or visit your website. Once they land on your website, whether they eventually purchase something is largely between you and that customer. Reddit has already provided you the traffic.
Simply to improve brand exposure (CPM).
This is where I think Reddit advertising is one of the most unique in the industry. The audience is massive, but more importantly the audience has already separated itself into very specific communities. Look at u / bloomberg. They have been publishing a lot on Reddit recently, but they are not just posting anywhere. They are actually quite smart and picky about finding the right community for each article.
For instance, Bloomberg publishes a piece about drones or some new military technology. Most broad readers probably don't care how sophisticated that weapon is, but put it into r/army or r/Military and suddenly you are putting that story in front of a large group of people who already care about the subject. Next they publish something about food prices or household finances and put it into subreddit r/MiddleClassFinance r/farming or r/food. On inflation, you can post it to r/inflation. Obviously these Bloomberg posts are organic content rather than paid ads, but my point is that this shows exactly why Reddit's structure is so valuable for advertising.
Another example is a game developer who recently developed his own game and wants to make some passive income. Usually it is quite difficult for a new developer to make money because there is no precise way to find the first group of users. Reddit offers them a unique solution through communities such as r/gamedev. You already have people there who are game developers or serious gamers. Sometimes developers can offer vouchers or access to the game and receive feedback. These are not random people. Some of them are hardcore developers, so their feedback can actually be quite valuable.
The same logic works everywhere. There are people looking for advice on divorce, so a divorce lawyer can advertise r/Divorce. There are new moms looking for advice about being a new mom, so businesses selling related products can advertise r/Mommit. r/beauty is now a very hot community where mega brands such as L'Oréal naturally want to be part of the conversation. Communities around brands like Victoria's Secret can be used to energize their most loyal customers r/victoriasecrets. The power of Reddit advertising is really underestimated here.
And actually, this post itself gives a pretty good example. Suppose I have a book on fundamental analysis. Open this comment section, 30mins later, I will find the first 10 users arguing with me and check their Reddit account ages. I would not be surprised if 9/10 have already been on Reddit for more than 3 years. Most of you read investment communities, talk about stocks and probably have brokerage accounts. If I wanted to advertise some investment research product, all of you would already be my extremely precise target audience. That is what I mean when I say advertising is not always about immediate purchase intent. Sometimes getting the right impression in front of exactly the right group is already extremely valuable.
Then there is data licensing. To be honest, I really do not view this as seriously as many other Reddit investors do. It gets hyped because Reddit owns an asset that most other companies simply don't have: a huge amount of fresh human discussion. There could be setbacks from lawsuits or companies refusing to pay for data access. Reddit can update policies, create stronger technical restrictions, continue fighting scraping, and fix legal loopholes. But ultimately this data is hosted and controlled by Reddit. As long as AI companies want fresh Reddit data for training, retrieval or inference, I think Reddit will continue to have leverage. I just don't need this part of the business to make the investment thesis work.
AppLovin
I have been a very early investor in AppLovin. I first became interested when they failed to stop the merger between Unity and ironSource. AppLovin looked pretty hopeless at the time. They owned a few dozen popular mobile games and a lot of the market treated them like a gaming company without much future.
It happened that I was not lazy when researching their financial statements. What caught my attention was management aggressively buying back their own shares when the market had almost given up on the company. I started a small position there, although I have to admit I never fully understood how powerful their advertising business could become until much later, especially after they eventually sold the entire gaming department.
Their transformational change really came from technological innovation, particularly AXON. AppLovin had accumulated enormous amounts of internal data through its portfolio of mobile games. They had years of information about gamer behavior, advertising, installs, purchases and monetization. Then machine learning (AI) used all of this information to make their advertising engine much better.
One person I think is worth paying attention to is their recently prompted CTO Giovanni Ge, who previously worked as a machine-learning engineer at Meta. Obviously I am not saying AXON is the work of one single person, but I do think AppLovin today is much more dependent on its technical advantage than Reddit is.
AppLovin is primarily a performance advertising business. The important thing here is that the advertiser cares about actual return. If AppLovin can identify exactly which users are likely to download an app or spend money, its customers make more money and therefore AppLovin makes more money. In some sense their interests are very closely aligned: if the customer earns more from the advertising campaign, AppLovin earns more as well. So far they are the best in the business, which is why their profit margin is so insanely high.
But this is also where I see the risk. If their algorithm stops being the best and another much better algorithm comes onto the market, AppLovin could be left scrambling. If important technical people leave and eventually create a better advertising system, advertisers have no reason to remain loyal to AppLovin just because it is AppLovin. They care about which platform gives them the best return. This does not mean AXON is easy to replace, but I think AppLovin's moat is much more dependent on continuing to stay technologically ahead.
Palantir
Palantir is basically a defense/government and enterprise SaaS company. I actually like the company (insane growth) but I have never invested in it because it has always been expensive.
The government side of Palantir is obviously very important, particularly Gotham and its work with defense and government agencies. At the same time, its commercial business has now become much larger than it used to be, so I would not describe Palantir as simply a defense company anymore. Its U.S. commercial business is now growing extremely quickly as well.
My concern with Palantir is more about how much future success is already priced into the stock. The company is being valued as one of the major winners of the AI/software era, so the market is already expecting extremely strong execution for a long period of time.
I also think there is a real long-term question around general AI systems. Claude, OpenAI and other AI platforms are becoming increasingly capable of working with company data, building software and automating workflows. Maybe Palantir becomes the company that controls this layer and becomes even more powerful. But there is also a possibility that increasingly capable general AI makes some traditional SaaS work much easier and cheaper. Then there come the issues with political backlash when Trump leaves office.
Overall
Overall, I think both AppLovin and Palantir can continue doing very well in the short-to-medium term, probably the next 1-2 years.
But Reddit is still the one I prefer as the real long-term investment.
The reason is that AppLovin's advantage depends heavily on remaining technologically ahead, while Palantir is already priced for enormous future success.
Reddit, on the other hand, already owns the asset I care about: the communities themselves and user habits. You can build another website that looks like Reddit, but recreating subreddit like gamedev, army, MiddleClassFinance, beauty, valueinvesting and thousands of other communities with years of posts, users and accumulated discussion is much harder.
That is why, out of these three, Reddit has my strongest long-term conviction on.
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Read my piece:
I Still Don't Understand Why Reddit Is This Cheap Compared to Everything Else.