Reddit Stock Crashes 10% Despite 61% Revenue Growth as Google AI Threatens Traffic

Reddit delivered record revenue, stronger profits and upbeat guidance, but slowing U.S. user growth exposed its dependence on increasingly volatile Google search traffic.

Reddit Earnings Beat Fails to Protect RDDT Stock

Reddit (NYSE: RDDT) reported second-quarter results that comfortably beat Wall Street forecasts, but investors focused on a more important threat: Google’s changing search experience may be reducing the referral traffic that feeds Reddit’s user growth.

RDDT closed Thursday at $178.04, up 0.03%, before plunging 10.08% to $160.09 in overnight trading. The decline erased nearly $18 per share and pushed the stock below its 200-period simple moving average on the four-hour chart.

The selloff came despite exceptional financial performance. Revenue increased 61%, earnings exceeded estimates and third-quarter guidance came in well above consensus.

The problem was not Reddit’s advertising business. It was the uncertainty surrounding how users will find Reddit as Google replaces traditional search links with AI-generated summaries.

Reddit Earnings: Quick Overview

• Second-quarter revenue jumped 61% to $805 million.
• Diluted earnings reached $1.25 per share, beating estimates near $0.95.
• Net income nearly tripled to $253 million.
• Advertising revenue increased 64% to $762 million.
• Adjusted EBITDA more than doubled to $343 million.
• Global daily active unique users rose 18% to 130.3 million.
• U.S. daily user growth slowed to 6%.
• International daily users increased 28%.
• Q3 revenue guidance of $860 million–$870 million exceeded estimates.
• RDDT fell 10% as investors focused on unstable Google search referrals.

Revenue Jumps 61% to $805 Million

Reddit generated second-quarter revenue of $805 million, significantly exceeding Wall Street’s estimate of approximately $730 million.

Advertising revenue increased 64% to $762 million. Other revenue, which includes licensing arrangements involving Reddit’s data, rose approximately 24% to $43 million.

The result marked Reddit’s eighth consecutive quarter with revenue growth above 60%, demonstrating that its advertising platform continues to expand rapidly even as the company reaches a larger scale.

Net income nearly tripled to $253 million from $89 million a year earlier. Diluted earnings increased to $1.25 per share from $0.45, beating estimates near $0.95.

Adjusted EBITDA more than doubled to $343 million, representing a margin of 42.6%. Gross margin expanded to 91.3%, while Reddit said it had surpassed $1 million in annualized revenue per employee.

Those figures show considerable operating leverage. Reddit can support revenue growth without the enormous infrastructure spending affecting Meta, Amazon, Alphabet and Microsoft.

CEO Steve Huffman described Reddit as a “low-spend company.” Capital expenditure was only around $1.1 million during the quarter, allowing the company to benefit from AI-enhanced advertising tools without constructing its own global network of data centers.

Advertiser Growth Remains Exceptional

Reddit’s advertising business remains the strongest part of the investment case.

Active advertisers increased more than 70% year over year, with particularly strong demand from retail, travel, mid-sized companies and international customers. Revenue generated through Reddit’s advertising API increased more than 40% from the first quarter.

The platform is using AI to help advertisers identify relevant communities, generate Reddit-specific advertising copy and apply lessons from successful campaigns. These tools lower the difficulty of launching campaigns while making Reddit’s extensive network of topic-focused communities easier to target.

Reddit’s users frequently discuss products, travel plans, personal finance, technology and purchasing decisions. That gives advertisers access to high-intent conversations that can be difficult to find on broader social-media feeds.

International advertising is also growing quickly. Overseas revenue increased 84% to $167 million, compared with a 56% increase in domestic revenue.

However, international users currently generate substantially less revenue. Reddit reported average revenue per user of $11.85 in the United States, compared with only $2.26 internationally.

That gap makes slowing U.S. user growth especially important.

Google Search Becomes the Central Risk

Global daily active unique users increased 18% to 130.3 million, slightly above expectations. Weekly active unique users rose 24% to 514.6 million, exceeding half a billion for the first time.

Those numbers appear strong, but the geographic breakdown unsettled investors.

U.S. daily active unique users increased only 6%, slowing from 7% in the previous quarter. International daily users rose 28%, meaning more of Reddit’s user growth is coming from markets that currently produce much lower revenue per person.

Management attributed part of the slowdown to volatile search-engine referrals.

Google has historically sent substantial traffic to Reddit through traditional search results. Users often add “Reddit” to queries because they want firsthand experiences and discussions rather than commercial websites.

Google’s AI Overviews can now summarize information directly on the search page, potentially reducing the need to click through to Reddit. Traditional links are also being pushed lower on the results page.

Huffman said the “10 blue links” historically created enormous value for the broader internet, while AI Overviews have not yet generated a comparable benefit. He argued that users seeking Reddit often want multiple human perspectives—not an AI-generated summary of those discussions.

The concern is structural. If Google extracts information from Reddit to answer queries without sending users to the platform, Reddit could lose valuable traffic even as its content contributes to Google’s AI products.

Reddit has data-licensing relationships with Google and OpenAI, but licensing revenue remains small compared with advertising. Other revenue was only $43 million during the quarter, versus $762 million from ads.

Management said it is evaluating its options and wants a “win-win” relationship with Google. Reddit is also working to convert temporary web visitors into direct app users, who are more engaged and valuable.

Until that strategy succeeds, search volatility may continue to influence U.S. user growth.

Guidance Still Beats Wall Street Forecasts

Reddit expects third-quarter revenue between $860 million and $870 million. The midpoint of $865 million is comfortably above the approximately $829 million analyst consensus.

The outlook implies continued rapid growth, although the pace would slow from the second quarter.

Adjusted EBITDA is expected to range from $385 million to $395 million, exceeding estimates near $369 million. At the midpoint, the forecast points to an adjusted EBITDA margin of approximately 45%.

Strong guidance suggests management has not seen a material deterioration in advertiser demand. It also shows that higher international activity and improvements to Reddit’s advertising platform are offsetting weaker search referrals for now.

The stock reaction therefore reflects future risk rather than a weak quarter. Investors are questioning whether Reddit can maintain premium growth if Google becomes less effective as a user-acquisition channel.

Competition adds another concern. Meta is applying Reddit-like community features across Threads and Facebook, giving advertisers alternative ways to target conversational interest groups.

RDDT Technical Analysis: Earnings Gap Breaks Major Support

Before the earnings release, Reddit’s four-hour technical picture was mixed.

RSI stood at 46.86, while Stochastic %K was 64.00 and the Commodity Channel Index was 19.18. Those readings showed neutral momentum. MACD and the momentum indicator carried buy signals, but the Awesome Oscillator remained negative.

The moving averages also reflected indecision. RDDT was trading near its short-term averages around $177–$180 while remaining above longer-term support at $173.40, $161.70 and $160.

The overnight decline to $160.09 has invalidated much of that setup.

RDDT has fallen below the 200-period EMA at $173.40 and marginally below the 200-period SMA at $161.70. Because the supplied indicators were calculated before the earnings gap, they do not yet reflect the full deterioration in momentum.

The $160 area is now the immediate technical test. A sustained break below it would confirm a bearish gap and could expose $150, followed by the $140–$145 region.

For a recovery, RDDT must first reclaim the 200-period SMA at $161.70. Above that, former support at $173.40–$176.50 becomes resistance. The major recovery zone lies between $177 and $180, where several short-term averages were clustered before earnings.

The key levels are:

• Immediate support: $160
• Secondary support: $150
• Major downside zone: $140–$145
• Initial resistance: $161.70
• Stronger resistance: $173.40–$176.50
• Major recovery barrier: $177–$180
• Bullish trigger: Reclaiming $173.40
• Bearish trigger: Four-hour close below $160

A rapid recovery above $161.70 could attract buyers who view the earnings reaction as excessive. However, failure to reclaim that average would leave the stock vulnerable to continued selling.

What to Expect From Reddit Stock in Q3

Reddit’s quarter was fundamentally strong. Revenue, profit, advertiser growth, adjusted EBITDA and guidance all exceeded expectations.

The 10% selloff reflects a deeper concern: Reddit does not fully control how many users reach its platform.

Google remains an important traffic source, and AI Overviews could weaken that relationship by using Reddit’s content without delivering the same number of referrals. Slower U.S. user growth is particularly concerning because American users generate more than five times the revenue of international users.

The bullish case depends on Reddit converting search visitors into direct users while continuing to expand its advertising platform. The bearish case is that Google’s AI transition permanently reduces referral traffic, forcing Reddit to spend more heavily on user acquisition.

Technically, $160 is the decisive level. Holding that support could produce an oversold rebound, but a confirmed break would expose $150. RDDT needs to reclaim at least $173.40 before the post-earnings damage begins to reverse.

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.

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