Reddit beats Q2 forecasts, but volatile search referrals unsettle investors

Reddit reported second-quarter revenue of $805 million, up 61% year over year, while net income climbed 183% to $253 million. Both figures exceeded Wall Street forecasts. The company also projected next-quarter revenue of $860 million to $870 million, but its shares still fell more than 10% in after-hours trading.

Why strong results failed to reassure investors

The concern was not Reddit’s current advertising performance but the stability of its audience funnel. CEO Steve Huffman told shareholders that referrals from search engines had been uneven and traffic became more volatile later in the quarter.

AI-generated search summaries can answer questions without sending users to the original discussion. The concern is part of the rise of AI search across platforms, which is changing how platforms acquire visitors and convert anonymous traffic into registered, returning users.

Search volatility and U.S. audience pressure

Reddit’s global audience increased, but U.S. daily active unique users slipped from 53.5 million in the first quarter to 53.2 million. Analysts pressed management on whether weaker search referrals could make it harder to move logged-out visitors into logged-in accounts.

“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.”

Reddit signed a content licensing agreement with Google in 2024 for AI training, while also licensing data to OpenAI. Huffman did not commit to a binary outcome for the Google relationship, saying Reddit would focus on maximizing the value it receives. He argued that communities and human conversation would continue to differentiate the platform.

For businesses, the signal is clear: strong revenue cannot offset excessive dependence on external discovery channels. Companies should measure how much qualified traffic comes from search, strengthen direct audience relationships and build reasons for users to return without relying on referrals controlled by AI platforms.