Sort of. The provided a functionality that reddit did not, so they weren't really unbundling anything. They smartly realized that reddit would probably eventually provide that same functionality (which they did) so they started down the path of building their own community before that happened.

Does Imgur make money and is it profitable? As far as I know their "business model" (which actually isn't one, or at least not a profitable one) is "growth and engagement".

Their core product isn't something people want to pay for (image hosting itself can be obtained anywhere, including from cloud storage subscriptions people already pay for), and their social side is at odds with the advertising business model - you need ads to survive, but ads revenue is forever decreasing and people will leave if you put too much ads.