Reddit posted second-quarter revenue of $805 million, up 61% year-over-year, and net income of $253 million, up 183%. Both figures beat Wall Street expectations, and the company guided third-quarter revenue to a range of $860 million to $870 million, also above consensus. On paper, the print was clean.
Investors did not treat it that way. Reddit shares fell more than 10% in after-hours trading, a reaction driven almost entirely by a single line in CEO Steve Huffman's letter to shareholders about the state of search referrals. The commercial business is growing, but the top of the funnel is wobbling, and the market read the wobble as structural rather than seasonal.
In the letter, Huffman told investors that referral traffic from search engines had grown uneven through the quarter, particularly in the back half. He framed the underlying business as intact even as the traffic mix shifted. The market focused on the first half of the sentence.
“Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter, but the bigger picture is unchanged: the commercial business is strong”— Steve Huffman, Reddit CEO
Key facts
- 01Reddit reported Q2 revenue of $805M, up 61% year-over-year, and net income of $253M, up 183%.
- 02The company guided Q3 revenue to $860M–$870M, above Wall Street expectations.
- 03Shares fell over 10% in after-hours trading after CEO Steve Huffman flagged 'choppy' search referrals.
- 04U.S. daily active uniques slipped to 53.2M in Q2 from 53.5M in Q1, even as global users grew.
- 05Reddit signed a data-licensing deal with Google in 2024; Huffman signaled the renewal is not a binary decision.
The context is the reshaping of web search by generative AI. Google has been rolling out AI-generated summaries at the top of search results, which answer user queries inline and reduce the need to click through to source sites. Reddit, whose community threads have long been a top destination for long-tail queries, is one of the most exposed publishers to that shift.
The user numbers reinforced the concern. Reddit's global daily active uniques grew, but U.S. daily active uniques slipped to 53.2 million in Q2 from 53.5 million in Q1. It is a small sequential decline, but in a quarter when investors are hunting for evidence of AI-driven traffic decay, a flat-to-down U.S. number is exactly the data point they magnify.
On Thursday's earnings call, analysts pressed hard on the issue. One framed it directly, telling the company that the market perceived a U.S. user problem tied to the shift in how people find content online. The analyst argued that logged-out traffic is under pressure as OpenAI and Google route more answers through AI, and that the funnel from logged-out visitor to logged-in Redditor gets harder as that top-of-funnel shrinks.
The same analyst asked whether Reddit could envision a future in which it does not license data to Google and OpenAI next year. It is a pointed question. Reddit signed a content-licensing deal with Google in 2024 that has been reported at roughly $60 million annually, and it has a separate arrangement with OpenAI. Both deals monetize the same corpus that is now being used to build products that may compete with Reddit for user attention.
Huffman leaned on the durability of Reddit's format in response. He argued that communities and conversation are universal, that Reddit has content for every U.S. audience, and that the company's job is to surface it more effectively. On the Google relationship specifically, he was deliberately vague.
That vagueness is defensible negotiating posture. Reddit's data is one of the more valuable training and grounding corpora on the open web, and the company has leverage that most publishers do not. The unresolved question is whether the licensing revenue can grow fast enough to offset any structural decline in referral traffic, which historically has been the primary way Reddit converted logged-out visitors into logged-in, ad-monetizable users.
The bear case is that Reddit is being paid to help train the systems that will erode its audience. The bull case is that AI answers still need to cite sources, that Reddit's community moat is not replicable by a language model, and that a $805 million quarter growing at 61% is not the shape of a business in decline. Both cases are alive after this print.
For the AI market, Reddit's stock reaction is the more interesting signal than the earnings beat. Public-market investors are now willing to punish a company for a single qualitative comment about AI-driven traffic volatility, even when the numbers beat on every quantitative line. That reprices every content platform whose traffic depends on Google referrals, and it strengthens the negotiating position of any data owner selling to a frontier lab. Reddit's next print will be judged less on revenue growth than on whether U.S. daily actives can turn back up while the licensing checks keep clearing.
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