Reddit delivered the kind of second-quarter results that would usually calm investors. Revenue rose sharply, net income climbed, and the company’s outlook for next quarter came in ahead of expected guidance.
But the market reaction told a different story. The stock slid over 10% in after-hours trading after investors focused on a more sensitive issue: whether AI is changing search in ways that could affect Reddit traffic.
The quarter looked strong on the surface
Reddit reported total revenue of $805 million, a 61% increase compared with the year-ago quarter. Net income was $253 million, up 183%.
Those figures beat Wall Street’s expectations. The company also said it expects revenue of $860 million to $870 million next quarter, along with healthy earnings before taxes. That guidance also beat expectations.
In a normal earnings cycle, those numbers could have been enough to support a positive stock reaction. Instead, investors appeared to look past the headline growth and focus on the stability of Reddit’s traffic sources.
The concern came from CEO Steve Huffman’s separate letter to shareholders, where he addressed search traffic directly. He wrote, “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.”
AI search is changing the traffic conversation
The investor concern centers on the way AI is reshaping search engine behavior. Reddit has long benefited when people discover discussions through search engines, especially when they are not already logged in to the platform.
The source article notes that AI is clearly changing the search engine landscape, and investors seem worried that Reddit could receive less traffic as users get more answers directly from search products.
That issue is especially complicated because Reddit signed a contract in 2024 to provide its content to Google for AI training. At the same time, Google’s deployment of AI summaries appears to be pulling some audience attention away from Reddit.
Reddit has also signaled that it is not sure whether it will renew the partnership with Google. That makes the relationship important on two fronts: Reddit’s content has value for AI systems, but AI-powered search may also change how often people click through to Reddit itself.
The U.S. user trend drew scrutiny
Another point of concern was where Reddit’s user growth is happening. Global users are up, but U.S. daily active uniques showed a very slight decline, moving to 53.2 million from 53.5 million in Q1.
That small drop became a focus during Thursday’s earnings call. Analysts pressed the company on whether AI-driven search changes could make it harder for Reddit to attract logged-out visitors and convert them into logged-in users.
One Wall Street analyst said, “I don’t want to belabor this point, but your stock is down sharply because there is just a sense from investors that you have a — I don’t want to, to be blunt — a user problem, especially in the U.S.,”
The same analyst continued by describing investor worries that logged-out traffic could come under pressure as search shifts toward AI. The question ended with a direct challenge: “Do you see any world where you’re not licensing data to Google and OpenAI next year?”
That exchange captured the tension around Reddit’s position. The platform has valuable human conversation, but the way people find that conversation may be changing.
Reddit is leaning on community as its defense
Huffman’s response focused on what makes Reddit different from search results and AI summaries. He pointed to the platform’s communities and conversations as the reason users will keep coming directly to Reddit.
“Reddit is communities and conversation. Communities are universal, and so we think we have in the U.S. content for everyone, and it’s a matter of revealing that. And we’re making progress towards that end,” Huffman said.
On Google, his answer was less definitive. “Our relationship with them actually predates the formal kind of data licensing agreements,” he said. “I don’t think there’s a binary outcome … we will make sure that we’re maximizing the value for Reddit.”
For investors, that leaves an unresolved question. Reddit’s commercial business is strong, and its financial results beat expectations, but the platform is now being judged against a fast-changing search environment.
The second quarter showed both sides of the story. Reddit is growing revenue and profit, yet the market is watching whether AI search will make its traffic less predictable. The next phase will depend not only on how Reddit performs financially, but also on whether its community-driven content remains a destination when search engines increasingly answer questions themselves.