Reddit stock fell nearly 10% in after-hours trading on July 30 despite reporting a strong Q2 earnings beat, as CEO Steve Huffman warned that Google’s AI Overviews have made search referral traffic unpredictable. The company earned $1.25 per share on revenue of $805 million, both exceeding analyst estimates, yet investors sold off shares over concerns about the impact of artificial intelligence on the platform’s traffic patterns.
The earnings results showed robust growth: revenue climbed 61% year-over-year, and net income jumped 183% to $253 million, marking the eighth consecutive quarter of over 60% revenue growth. Advertising revenue grew 64% year-over-year, driven by new AI-powered ad tools. Reddit also reported adjusted EBITDA of $340 million, hitting a 43% margin—a company record.
Yet the stock’s decline centered on a challenge Huffman highlighted during the earnings call. “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter,” Huffman said, according to TechCrunch. Google’s AI Overviews—summaries that pull information directly into search results—have made referral patterns less predictable, reducing the reliability of search-driven traffic to Reddit’s communities.
This concern echoes a broader challenge facing content platforms as AI search tools mature. When Google’s AI Overviews answer user questions directly in search results, fewer users click through to the original source—in this case, Reddit’s pages. Huffman noted that AI Overviews have not yet matched the performance of traditional “10 blue links,” the standard search results format, but the unpredictability itself created investor anxiety about future traffic sustainability.
Despite the near-term concern, Reddit raised its third-quarter revenue guidance to $860 million to $870 million, above the $829 million consensus estimate. This forward outlook underscored management’s confidence in advertising growth and user engagement, yet it failed to offset the immediate worry about search traffic volatility. The company also announced a $500 million share repurchase program, signaling confidence in long-term value.
The selloff reflects a pattern seen across earnings season: strong results can fail to lift a stock when forward guidance or operational headwinds raise questions about sustainability. Roblox stock plunged 29% after Q2 earnings beat but weak guidance, and SoFi earnings beat estimates, raises revenue outlook but stock falls, both showing that investor focus often shifts to what comes next rather than what was just delivered. In Reddit’s case, the combination of strong earnings and optimistic guidance was overshadowed by Huffman’s candid acknowledgment of search traffic volatility tied to AI disruption.
Reddit has been at the center of AI data licensing negotiations throughout 2026. In May, the company signed a $60 million annual deal with Google for AI training data—a significant revenue stream. Earlier in July, the Wall Street Journal reported that Reddit was considering restricting Google’s access to its content for AI model training, signaling tension over how much of Reddit’s human-generated conversations should fuel competing AI systems. That uncertainty, combined with Huffman’s warning about search traffic, appears to have triggered the post-earnings decline.
Daily active uniques grew 18% year-over-year, though U.S. growth showed signs of slowing. The company now faces a delicate balance: monetizing its data and communities through AI partnerships while managing the risk that those same AI tools could reduce search-driven traffic to its platform. For investors, the earnings beat alone was not enough to overcome doubt about whether Reddit can sustain growth as AI reshapes how users discover content.
Sources
- Barron’s — Reddit stock fell 9.6% in premarket trading on worries about AI disruption following Q2 earnings beat.
- CNBC — Reddit reported Q2 earnings of $1.25 EPS on $805 million revenue, beating estimates; CEO Huffman flagged choppy search referrals due to Google’s AI Overviews.
- TechCrunch — CEO Steve Huffman warned that search referrals were choppy and traffic more volatile in Q2 due to AI impact.
- Reuters — Reddit flagged volatile search referrals as U.S. user growth slowed; Huffman said AI Overviews have not yet matched traditional search performance.
- Business Wire — Reddit reported net income of $253 million (31% margin) and adjusted EBITDA of $340 million (43% margin) in Q2 2026.
- Investing.com — Reddit stock fell 12.49% in after-hours trading to $155.80 from $178.34; company beat revenue forecast and raised Q3 guidance to $860–$870 million.
- Insider Finance — Reddit raised third-quarter revenue guidance to $860–$870 million, above consensus estimate, as advertising growth and AI ad tools attracted new business.
