Reddit Beat and Raised, Then Crashed 23%

The Beat That Broke the Chart

Reddit shares cratered 23% on Friday, the stock's worst intraday drop since its 2024 IPO. That selloff followed a second-quarter report that beat Wall Street on every headline number. Revenue hit $805 million, up 61% year over year, versus $730 million expected. Earnings per share landed at $1.25, more than 30% above the roughly 95-cent consensus.

Reddit didn't just beat the quarter, it raised the next one. Third-quarter revenue guidance came in at $860 to $870 million against a Street estimate near $828 million, with adjusted EBITDA guided to $385 to $395 million versus $368 million expected. That is a beat-and-raise by almost any textbook definition. Yet the stock still gave up nearly a quarter of its value in a single session, so the number that mattered to traders was not on the earnings sheet at all.

Where the Growth Actually Came From

Underneath the headline growth, the user base tells an uneven story. Global daily active uniques rose 18% year over year to 130.3 million, but U.S. daily active users grew just 6% to 53.2 million, actually slipping sequentially from 53.5 million. International daily uniques, by contrast, surged 28% to 77.1 million. The company's core American audience, historically its most valuable, is the part that stalled.

CEO Steve Huffman named the reason directly on the earnings call. He said search referrals were choppy in the quarter, and traffic was more volatile later in the quarter. Google simultaneously sends Reddit its traffic, licenses Reddit's content to train AI models, and now builds the AI search summaries that keep users from ever clicking through to Reddit's own pages. That three-way relationship is the mechanism investors are pricing, not the quarter Reddit just reported.

The Deal That Didn't Happen

The deeper reframe is that this selloff was not really about the numbers Reddit reported, it was about a number Reddit didn't announce. Investors had been positioning for a new AI data-licensing deal alongside Reddit's existing arrangements with OpenAI and Google, the kind that brought in roughly $60 million a year under the current Google agreement. No new deal came. Instead, the company is reportedly reconsidering whether to even extend the existing Google content-training deal, because Google's own AI summaries have been cutting into the referral traffic that deal was supposed to be worth.

Wall Street's response reflects that same split. Both Cantor Fitzgerald and Piper Sandler cut their price targets on user-growth and referral concerns even as Reddit's own guidance implies continued acceleration. Huffman pushed back on the idea that Google is Reddit's whole story, saying that in an increasingly automated web, the value of real human perspective has never been higher. The two readings will be tested by the same forward number: whether U.S. daily active users stabilize and whether search referrals steady out before Reddit reports its Q3 results against the guidance it just gave. Until that print, the market is pricing the referral risk, not the quarter that just beat it.