There's simply no way they're making anywhere near that from advertising. I would even have a hard time they're making that a year from advertising.
Let's say their CTR is 0.1%. That's 300k clicks/month. I'm building in some wiggle-room here, as a 0.1% CTR is abysmal, but often their ads aren't really ads. Even at $0.01/click, that's still $30k/month. More than enough for hosting. Now, I'd hazard a guess that most of my numbers are quite a bit on the low side, as reddit has operated for years without CN shutting the doors. Also, from what the admins have intimated from time to time, they make money, but not enough to register on CN's radar.
I wouldn't discount their ad sales; traffic like that carries a lot of weight.