Reddit beats earnings estimates, but AI search fears sink the stock

Reddit’s total revenue reached $805 million in the quarter, up 61% from the year-ago period, while net income came in at $253 million, up 183% — both ahead of Wall Street’s expectations. The company also guided to revenue of $860 million to $870 million for the next quarter, with healthy earnings before taxes, again beating expected guidance.

Despite those numbers, Reddit shares slid over 10% in after-hours trading. The likely trigger was a separate letter to shareholders in which Huffman wrote: “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter, but the bigger picture is unchanged: the commercial business is strong.”

The warning lands as AI reshapes how people find information online. In 2024, Reddit signed a contract to supply its content to Google for AI-training purposes, but Google’s rollout of AI-generated search summaries appears to be pulling audience share away from Reddit, and the company has signaled it isn’t sure whether it will renew that partnership.

User growth is also uneven. Reddit’s global user base is up, but U.S. daily active unique users slipped only slightly, to 53.2 million from 53.5 million in the first quarter.

On Thursday’s earnings call, analysts pressed Huffman on AI’s effect on Reddit’s audience. One Wall Street analyst said bluntly that investors sense the company has a user problem, especially in the U.S., reasoning that as search shifts toward AI-generated answers, logged-out traffic will keep losing referrals and it will become harder to convert logged-out visitors into logged-in users. The analyst also asked whether Reddit might, at some point, stop licensing its data to Google and OpenAI altogether.

Huffman pushed back, arguing that Reddit’s community-driven, conversational nature would keep it a destination for users regardless of how search evolves, and that the company is making progress toward surfacing more U.S.-relevant content. On the Google relationship specifically, he was noncommittal — noting that it predates the formal data-licensing arrangements and that the outcome isn’t binary, with Reddit focused on maximizing the value of the relationship.

Why it matters

Reddit’s results show that even strong financial performance can’t offset investor anxiety about AI’s disruption of search-driven traffic — a risk any platform that depends on search referrals now has to manage.