Reddit reports a solid quarter but shows signs of AI’s impact
Reddit reported strong second-quarter financial results, but its stock price fell due to concerns over volatile search engine traffic and potential impacts from AI-driven search summaries. The company is also facing scrutiny regarding its U.S. user growth.
Why it matters
This reflects the broader market anxiety regarding how AI search tools are disrupting traditional web traffic models for content-heavy platforms.
Reddit reported a strong second quarter but spooked investors by mentioning in an investor letter that traffic from search engines had grown “choppy.”
The company’s total revenue of $805 million jumped 61% compared to the year-ago quarter while net income was $253 million, up 183%. These beat Wall Street’s expectations. Plus, the company said it expects to hit revenue of $860 million to $870 million with healthy earnings before taxes next quarter as well, which beat expected guidance.
Normally, telling investors that they can expect even better results to come would cause a stock to rise. But the stock slid over 10% in after-hours trading.
The culprit was likely CEO Steve Huffman’s warning in that separate letter to shareholders. “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,” he wrote.
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