Reddit earnings beat expectations, but AI traffic worries hit shares

Reddit earnings AI traffic concerns took center stage after the company reported a stronger-than-expected second quarter but warned that search-engine referrals had become less predictable. For everyday investors, the tension is clear: Reddit is growing revenue and profit fast, while the market is asking whether AI search could slow the user traffic that feeds its ad business.

Reddit said second-quarter revenue reached $805 million, up 61% from the same period a year earlier. Net income rose 183% to $253 million, according to the company’s earnings release.

Those figures came in above Wall Street expectations, and Reddit also gave a stronger outlook for the next quarter. The company said it expects revenue of $860 million to $870 million, along with healthy earnings before taxes.

The stock reaction went the other way. Reddit shares fell more than 10% in after-hours trading after the report, as investors focused on management’s comments about search traffic rather than the headline financial results.

How is AI affecting Reddit traffic?

CEO Steve Huffman told shareholders that “search referrals were choppy in the quarter” and that traffic became more volatile later in the period. Search referrals are visits that come from search engines such as Google, a key source of logged-out traffic, meaning people browsing Reddit without signing into an account.

The concern is that AI-generated search summaries can answer some queries directly on a search page, reducing the need for users to click through to sites like Reddit. That mechanism matters for Reddit because more visits can support more ad impressions, and more logged-out visitors can create opportunities to convert casual readers into signed-in users.

Reddit’s relationship with Google adds another layer to the story. In 2024, Reddit announced a deal to make its content available to Google for AI training. The company has also signaled uncertainty about whether it will renew that partnership, according to Yahoo Finance.

User growth also drew attention. Reddit’s global user base increased, but daily active uniques in the U.S. slipped to 53.2 million from 53.5 million in the first quarter. Daily active uniques are a count of distinct users who use the platform on a given day.

On Thursday’s earnings call, analysts pressed management on whether AI-driven search changes could pressure Reddit’s logged-out traffic and make it harder to move users into logged-in accounts. One Wall Street analyst said investors saw a possible “user problem,” particularly in the U.S., and asked whether Reddit could stop licensing data to Google and OpenAI next year.

Huffman argued that Reddit’s core appeal remains its human conversation and community structure. “Reddit is communities and conversation,” he said on the call, adding that the company believes it has U.S. content for everyone and is working to reveal that content more effectively.

Asked about Google, Huffman did not describe a single fixed outcome. He said Reddit’s relationship with Google existed before formal data-licensing agreements and that the company would work to maximize value for Reddit.

For investors, the quarter showed two different reads on the same company. The financials pointed to strong commercial momentum, while the stock move showed that traffic quality, U.S. user trends and AI search exposure may now carry as much weight as revenue growth in how the market values Reddit.

This story draws on original reporting from TechCrunch.