Reddit reported second-quarter revenue of $805 million, up 61% year-over-year, and net income of $253 million, up 183%, comfortably beating Wall Street’s expectations, and guided next quarter’s revenue to $860 million to $870 million, also above consensus. The stock slid more than 10% in after-hours trading anyway. A company beating every headline number and still getting punished this hard by the market is what NewsTrackerToday reads to as the more revealing story than the earnings beat itself.
The trigger sat buried in a separate shareholder letter rather than the earnings release itself: CEO Steve Huffman wrote that “search referrals were choppy in the quarter, and traffic was more volatile later in the quarter,” while insisting “the bigger picture is unchanged: the commercial business is strong.” That single word, choppy, describing search-driven traffic, is what set off the selloff, not any number in the actual financial results.
Isabella Moretti reads why investors zeroed in on that specific line: “Reddit signed a deal in 2024 to license its content to Google for AI training, and Google’s AI Overviews feature has been visibly pulling search traffic away from the sites it used to send users to, including Reddit. The company has separately signaled it’s unsure whether it will renew that Google partnership. Choppy search referrals aren’t a minor operational footnote here, they’re a direct read on whether Reddit’s biggest traffic source is quietly eroding underneath a still-strong revenue line.” That traffic-source fragility, more than this quarter’s actual numbers, is what NewsTrackerToday pins round as the real concern driving the stock reaction.
The user data underneath the revenue numbers adds to that concern: Reddit’s global user base grew, but U.S. daily active unique users edged down slightly to 53.2 million from 53.5 million the previous quarter, a small decline but one happening in Reddit’s most commercially important market at the exact moment search-referral traffic is described as volatile.
Liam Anderson reads the analyst questioning on the earnings call as unusually pointed: “One Wall Street analyst told Huffman directly that the stock’s decline reflects a sense investors have ‘a user problem, especially in the U.S.,’ and pressed him on whether Reddit could envision a future without licensing data to Google and OpenAI at all. That’s an analyst essentially asking whether Reddit’s entire AI-licensing revenue stream is at risk, live on an earnings call, which tells you how seriously the market is now weighing this specific risk against otherwise excellent financial results.” That direct, on-record skepticism, more than the choppy-traffic line itself, is what NewsTrackerToday circles on as the clearest signal of where investor anxiety actually sits.
Huffman’s response leaned on Reddit’s core identity rather than a specific traffic fix: “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.” On the Google relationship specifically, he was notably vaguer, saying only that the relationship “predates the formal kind of data licensing agreements” and that he doesn’t see a “binary outcome.”
None of this confirms whether search-referral traffic actually stabilizes in the coming quarters or continues eroding as AI-generated search summaries keep pulling clicks away from source sites across the web, a dynamic Reddit doesn’t fully control regardless of its own product decisions. Whether Reddit’s community-driven identity proves durable enough to offset AI-driven traffic loss, or whether this quarter’s stock reaction marks the start of a longer repricing of Reddit’s dependence on search referrals, is what News Tracker Today closes round as the real question this earnings call leaves unresolved.
