Reddit’s revenue rises 61% but AI-driven search shifts unsettle investors

Reddit’s second-quarter results showed strong financial performance, with total revenue of $805 million, a 61% increase compared to the same period last year, and net income of $253 million, up 183%. The company also projected revenue of $860 million to $870 million for the next quarter, exceeding Wall Street’s expectations.

However, the company’s stock fell over 10% in after-hours trading following CEO Steve Huffman’s warning about "choppy" and volatile search referrals. Huffman attributed the volatility to broader shifts in the search landscape driven by AI, which he said was altering how users discover content.

The earnings call highlighted concerns about Reddit’s U.S. user base, which saw a slight decline in daily active uniques from 53.5 million in Q1 to 53.2 million. Analysts questioned whether this trend reflected a structural shift in user behavior, particularly as AI-driven search reduces the need for users to visit Reddit directly.

During the call, one analyst directly linked Reddit’s stock decline to investor fears about the platform’s reliance on logged-out traffic and the potential erosion of referrals as AI summaries become more prevalent. The analyst asked whether Reddit would continue licensing its data to Google and OpenAI in 2025, a question Huffman did not answer definitively.

Huffman emphasized Reddit’s value as a destination for human communities and conversations, suggesting the platform’s unique social dynamics would sustain user engagement despite broader industry shifts. He also noted that Reddit’s relationship with Google predates formal data licensing agreements, leaving the future of their partnership uncertain.