RDDT Stock Drops 8% as Google AI Data Deal Uncertainty Overshadows Reddit’s Q2 Earnings Outlook

Quick overview

Reddit shares tumbled after reports that the social media platform is reconsidering whether to renew its artificial intelligence data licensing agreement with Google, raising fresh concerns about one of Wall Street’s favorite AI monetization stories just days before the company reports second-quarter earnings.

Reddit’s latest selloff reflects a growing debate across the internet economy.

For the past two years, investors have viewed Reddit’s vast archive of user-generated discussions as one of the most valuable datasets available for training large language models. Licensing agreements with Google and OpenAI transformed that data into a new revenue stream, helping justify Reddit’s premium valuation.

Now, as Google’s AI-generated search summaries increasingly reduce referral traffic to publishers and websites, Reddit is reportedly questioning whether those licensing arrangements still provide enough value.

The uncertainty erased billions of dollars in market value and reminded investors that AI partnerships are becoming more complicated as technology companies compete not only for data, but also for user attention.

Reddit’s Google AI Deal Faces Renewed Scrutiny

According to reports, Reddit has internally discussed restricting Google’s access to its content for AI model training as negotiations continue over renewing the companies’ existing agreement.

The current partnership, signed in 2024 and reportedly worth around $60 million annually, allows Google to use Reddit’s discussions to train and improve its AI systems.

However, Google’s growing use of AI-generated search summaries has changed the economics of those agreements.

Instead of directing users toward publisher websites, AI Overviews increasingly answer questions directly within Google Search, reducing referral traffic across much of the internet.

For Reddit, whose community-generated discussions have become one of Google’s most valuable information sources, management is reportedly reassessing whether simply licensing data remains the best commercial arrangement.

A Reddit spokesperson emphasized that negotiations are focused on ensuring future partnerships properly recognize the value of Reddit’s unique content while supporting long-term business growth.

Google responded by reiterating that its AI products continue sending billions of clicks across the web and help creators reach broader audiences.

AI Licensing Has Become an Important Revenue Driver

Although advertising remains Reddit’s largest business, data licensing has become an increasingly important growth engine.

The company maintains separate licensing partnerships with both Google and OpenAI, allowing those companies to access Reddit’s discussions for AI model development.

Those agreements have helped investors assign greater strategic value to Reddit beyond traditional digital advertising.

During the first quarter, Reddit generated $663 million in revenue, representing growth of 69% year-over-year, while data licensing contributed approximately $39 million.

Management has consistently described both Google and OpenAI as valuable long-term partners.

However, the current negotiations suggest the economics of AI content licensing may be evolving as publishers seek compensation that better reflects both the value of their data and the impact AI search experiences have on website traffic.

If Reddit secures improved commercial terms, the negotiations could ultimately strengthen its long-term monetization strategy.

If discussions break down, however, investors may need to reconsider assumptions surrounding future AI licensing revenue.

AI Search Is Reshaping the Internet Economy

Reddit’s negotiations reflect a broader shift affecting publishers across the internet.

As AI-powered search becomes more capable of answering questions directly, many websites are experiencing declining traffic from traditional search results.

Reports indicate that several major publishers have suffered double-digit declines in Google referral traffic over the past year as AI-generated summaries become more prominent.

That has forced media companies, publishers and online communities to reconsider whether unrestricted AI access to their content remains commercially attractive.

Some companies have chosen licensing agreements.

Others have pursued litigation or implemented technical restrictions limiting AI crawlers.

Reddit occupies a particularly important position because of the uniqueness of its content.

Unlike conventional news articles, Reddit contains millions of real conversations, recommendations and community discussions that AI systems frequently reference when answering user questions.

That makes Reddit one of the most valuable repositories of human-generated conversational data available today.

Reddit Earnings Could Shift Investor Focus

Despite the licensing uncertainty, Reddit’s underlying business has remained strong.

The company will report second-quarter earnings on July 30, with analysts expecting revenue of roughly $733 million and earnings approaching $0.97 per share.

Reddit has exceeded earnings expectations in each of its previous eight quarterly reports, building a reputation for conservative guidance and consistent execution.

Advertising continues benefiting from improvements in recommendation algorithms, better advertiser targeting and expanding international engagement.

Several analysts also believe Reddit continues gaining share within digital advertising despite increased competition from larger social media platforms.

The upcoming earnings report will therefore carry additional importance.

Investors will look beyond headline revenue to determine whether advertising growth remains strong enough to offset uncertainty surrounding AI licensing agreements.

Any commentary regarding negotiations with Google or OpenAI is also likely to receive significant attention.

Can Reddit Balance Advertising and AI Monetization?

One of Reddit’s biggest strategic advantages is that it now operates two complementary growth businesses.

Its traditional advertising platform continues expanding as more brands target highly engaged online communities.

At the same time, licensing Reddit’s data to AI companies creates a second high-margin revenue stream requiring relatively little additional investment.

The challenge is balancing those opportunities.

Allowing AI companies unrestricted access may increase licensing revenue but could also reduce traffic if AI systems answer user questions without directing people back to Reddit.

Restricting access, meanwhile, could strengthen Reddit’s negotiating position but risks reducing licensing income if agreements cannot be renewed.

Management appears focused on maximizing the long-term value of Reddit’s data rather than simply extending existing contracts.

That approach may create short-term uncertainty, but it also reflects how rapidly AI is reshaping digital content economics.

Insider Selling Adds to Investor Caution

Investor sentiment has also been affected by recent insider transactions.

Earlier this month, CEO Steve Huffman and Chief Operating Officer Jennifer Wong sold several million dollars’ worth of company stock.

While executive selling is common and often unrelated to business performance, the transactions occurred shortly before reports emerged regarding Google’s licensing negotiations.

Combined with broader weakness across internet stocks, the timing contributed to increased caution ahead of earnings.

The market will likely focus far more on Reddit’s operating results than insider activity, but the combination of licensing uncertainty and executive selling has created additional volatility for the shares.

RDDT Technical Analysis: $170 Is the Key Support Level

Reddit’s four-hour chart remains under pressure following the sharp decline.

RDDT is trading below nearly every major moving average, confirming that sellers continue controlling the short-term trend.

Immediate support sits around $170, where overnight trading has stabilized following Wednesday’s selloff. A sustained break below this area could expose the $160 region, with the 200-period simple moving average near $159.80 providing stronger longer-term support.

The first recovery hurdle is the Hull Moving Average near $175.30, followed by the 100 EMA around $176.50. A heavier resistance zone sits between $181 and $187, where the 10, 20, 30 and 50-period moving averages, VWMA and Ichimoku baseline remain clustered.

Momentum remains mixed. RSI has fallen to 34.6, approaching oversold territory, while CCI and Momentum have shifted to buy signals, suggesting selling pressure may be fading. However, MACD continues flashing a sell signal, indicating the broader downtrend remains intact.

For sentiment to improve, RDDT first needs to reclaim $176, with a sustained move above $181-$187 providing the first meaningful confirmation that buyers are regaining control.

AI Content Is Becoming More Valuable Than Ever

Reddit’s latest decline illustrates how quickly the AI landscape is evolving.

Just two years ago, licensing agreements with major AI companies were viewed almost entirely as incremental revenue opportunities.

Today, those same agreements involve broader strategic questions about traffic ownership, content value and long-term platform economics.

The company’s core business continues performing well, advertising demand remains healthy and analysts still expect another strong earnings report.

However, investors now want clarity on how Reddit intends to monetize one of the internet’s most valuable collections of human conversation without undermining its own long-term growth.

Until negotiations with Google become clearer, uncertainty around AI licensing may continue driving volatility.

For now, traders will be watching the $170 support level, while long-term investors turn their attention to next week’s earnings report and management’s vision for Reddit’s role in the rapidly changing AI ecosystem.

ABOUT THE AUTHOR See More

Aiswarya Gopan

Financial Writer & Editor - Asia & Europe Desk

Aiswarya Gopan is a financial journalist, editor, and content strategist with more than 19 years of experience across financial markets, fintech, blockchain, and technology. She has worked with leading cryptocurrency exchanges, including BingX and KuCoin, driving content strategy, market research, and editorial initiatives covering digital assets, DeFi, Web3, and global financial markets. Drawing on a background in cybersecurity, technology journalism, and market research, Aiswarya specializes in translating complex financial and blockchain developments into clear, timely insights. At FX Leaders, she covers cryptocurrency, stocks, forex, and macroeconomic developments across the Asian and European trading sessions.

UBER Stock Slips 1.7% as AI Job Cuts and $14.8 Billion Delivery Hero Deal Raise Execution Risks

1 hour ago

Save

META Stock Falls 2.5% Before Earnings as $145 Billion AI Spending Plan Tests Investor Confidence

3 h ago

Save

PLTR Stock Drops 6% as Valuation Fears, NHS Scrutiny Build Before Palantir Earnings

4 h ago

Save