Reddit had a great quarter. So why did its stock drop 10%?
Strong revenue, strong profit, strong guidance. None of it mattered once investors heard two words: 'choppy traffic.'
Key points
- Reddit posted Q2 2025 revenue of $805 million, a 61% jump from the same period last year.
- Net income hit $253 million, up 183% year-on-year, beating Wall Street expectations on both counts.
- Reddit's stock fell more than 10% in after-hours trading after CEO Steve Huffman warned that search referrals had turned "choppy."
- U.S. Daily active users dipped from 53.5 million in Q1 to 53.2 million in Q2, a small but closely watched slide.
- Reddit signed a deal in 2024 to let Google use its content for AI training but has signalled it may not renew.
On paper, Reddit just had one of its best quarters ever. Revenue of $805 million. Net income of $253 million. A forecast for next quarter that beat analyst expectations. That's the kind of report that usually sends a stock higher.
Instead, Reddit's share price fell more than 10% in after-hours trading on Thursday.
What spooked investors?
CEO Steve Huffman wrote to shareholders that "search referrals were choppy in the quarter, and traffic was more volatile later in the quarter." He added that the broader business picture was "unchanged," but investors locked onto the first part.
The fear is simple. Reddit relies heavily on Google search to bring in visitors, many of them people who are not logged in. When those referrals drop, so does a big slice of Reddit's audience. And AI summaries, the short automated answers Google now places at the top of many results pages, often answer a question before the user clicks anything at all. Fewer clicks, fewer Reddit visitors.
Does Reddit's deal with Google make this worse?
Possibly, yes. In 2024 Reddit signed a contract letting Google use its posts and comments to train AI systems, the software that now generates those summaries. The irony is uncomfortable: Reddit may have helped build the very tool that is keeping visitors away. We noted the wider pressure on web publishers from this dynamic in our 24 July story on the collapse of Google's traffic model, and Reddit is now the clearest public example of the numbers.
On Thursday's earnings call, one Wall Street analyst put it plainly: "Your stock is down sharply because there is just a sense from investors that you have a user problem, especially in the U.S."
Huffman leaned on Reddit's human quality in reply. "Reddit is communities and conversation," he said. "Communities are universal." On whether Reddit would renew the Google data deal, he was deliberately vague, saying the relationship "predates the formal kind of data licensing agreements" and that Reddit would "make sure we're maximising the value for Reddit."
| Metric | Q2 2025 | Change vs Q2 2024 |
|---|---|---|
| Total revenue | $805 million | +61% |
| Net income | $253 million | +183% |
| Q3 revenue guidance | $860M, $870M | Above analyst expectations |
| U.S. Daily active users | 53.2 million | Down from 53.5M in Q1 2025 |
What does this mean for ordinary Reddit users?
Nothing changes today. The site works the same. But the story is worth watching: if Reddit decides to block Google's AI crawlers or renegotiate its data deal, the results you see when you search for real-world advice could shift noticeably.
For anyone running a business or a community that depends on Google traffic, Reddit's situation is a useful early warning. AI summaries are already reshaping which sites get clicks. Reddit is big enough that the pain shows up in quarterly filings. Smaller sites won't have that early signal. Check your referral sources now, not after a bad quarter confirms what the trend has been building toward for months.
My read: the financials are genuinely strong, and Huffman is right that Reddit's community depth is real. But the logged-out traffic question is not going away, and the Google data deal negotiation is the thing to watch closely over the next six months.
Common questions
Is Reddit in financial trouble?
No. Revenue and profit both grew sharply and guidance is strong. The concern is about a specific traffic trend, not the company's overall health.
What is an AI summary, and why does it affect Reddit?
An AI summary is a short, automatically generated answer Google places at the top of search results. When it answers the user's question directly, many people stop scrolling and never click through to Reddit or any other site.
Should I be worried about the data Reddit sold to Google?
Your posts are already public on Reddit. The 2024 deal gave Google a paid licence to use that public content for AI training. Reddit did not hand private messages or account data to Google.
