You're creating a false dichotomy. It is both, when there is no damage being taken, or if it can outsustain the bleed for the damage taken than you still have sustain. If you are shielded such that the damage tick is ticking off the shield, you are sustaining. If you deal damage such that 15% of your physical damage is more than 15% of the damage you've taken recently, congrats, you still have sustain, plus whatever sustain you have from Doran's, runes, masteries, and other lifesteal items.
Don't make things into false binary propositions. The world is not black nor white but a multifarious blob of different shades of grey. The least you could do is not truncate your logic into an illogical mess. DD does not provide sustain or damage reduction. It provides passive damage off-set coupled with very powerful, extremely easy to use sustain, which when one is actively taking damage, function in tandem as a form of damage mitigation. Based on a whole host of outside factors, they can either sustain beyond the damage mitigation, or have it function as temporary partial damage reduction in instances wherein they take more damage from the bleed than they can lifesteal. . .
But this instance only can occur when the ADC is being repeatedly bursted for huge percentages of their max health, or was recently bursted to what would have been a 100-0 without the item, and then were hard CCed so they couldn't attack; or they must have fucked up their positioning to ever be in a case where it might not offer damage reduction and sustain. That said, if you didn't have DD you would die outright in either scenario and much faster, I might add, so you will get very little if any sympathy from me in those instances as bar none the safest and most powerful class in League of Legends with the second longest range outside of Artillery Mages, the best pushing power, best objective damage, best teamfight damage, best sustained damage, and lowest resource cost + guaranteed point and click damage, and yet you weren't able to use that plus a metric fuckton of free defensive stats, and an over abundance of other lifesteal, plus sustain from your team now that everyone and their mother builds support and defensive items just to stack on their ADC on top of all the stupid shit like PD, DD, and new GA, not to mention older shit like Maw, BT, BotRK and MS which all just further compounds the sheer, ludicrous value that DD and its damage delay + unique sustain mechanic provide.
EDIT: still don't think it provides damage reduction? Consider this:
For a champion with DD to get bursted 100-0 it would take 142.9% damage instead of 100% (142.9 X 0.7 = 100.03) The enemy must now either waste an additional 43% of the damage it would take to kill you, to overkill the target or they allow that target, who would otherwise already be dead, the time to fight back with damage/CC for at least 3 additional seconds that they wouldn't otherwise have.
You probably aren't a tank player, but to those of us who are, this alone is easily recognizable as a huge amount of damage reduction from the other team, if for no other reason than that they must burn 43% more damage on the highest priorty target on your team, who now also has an additional form of damage mitigation to make it take them even longer to die, to allow your team and your support more time to get their CC/exhausts/heals/shields on the ADC, so now they need even fucking more burst to kill a target they've already had to almost 50% overkill and oh, hey wait? You know what's happening this entire time? The rest of your team is taking so much less damage as they are spending 3+ seconds still trying to take out a priority target who would otherwise already be dead two times over by that point, because of DD damage delay.