Why RDDT stock is sinking after Reddit's Q2 earnings beat
RDDT stock sank about 11% after Reddit beat second-quarter estimates, as CEO Steve Huffman warned that search referrals were choppy and more volatile late in the quarter. Strong sales and upbeat guidance failed to calm investors worried about Google-driven traffic to the platform.
Key Takeaways
- RDDT stock fell roughly 11% after hours despite a clear Q2 beat on revenue and earnings.
- Revenue hit $805 million, up 61% year over year, while EPS reached $1.25 versus 95 cents expected.
- CEO Steve Huffman said search referrals were "choppy" and more volatile later in the quarter.
- Q3 revenue guidance of $860–$870 million topped Wall Street's $828 million forecast.
- Daily active unique users rose 18% to 130.3 million, but Google traffic remains a flashpoint.
What happened to RDDT stock after earnings?
Reddit reported second-quarter results that beat on both the top and bottom lines, then watched RDDT stock slide in after-hours trading. Sales came in at $805 million versus about $730 million expected, rising 61% from $500 million a year earlier.
Earnings per share were $1.25 against a 95-cent consensus. Net income climbed to $253 million from $89 million. Free cash flow more than doubled to $261 million from $111 million. For more market and wealth coverage, see BlasterPost's Net Worth & Wealth hub.
Why did investors ignore the beat?
The scare was traffic, not the P&L. In the investor letter, Huffman wrote that "search referrals were choppy in the quarter, and traffic was more volatile later in the quarter." That line hit a known soft spot: Reddit still leans on Google to bring in users.
Concerns have grown that Google's Gemini-powered AI experiences, including AI Overviews, could cut referral clicks. Huffman said Reddit has "still yet to find that win-win" on AI Overviews, while staying collaborative. He also stressed that "the commercial business is strong" and revenue growth remains differentiated.
How strong was Reddit's guidance and user growth?
Management guided third-quarter revenue to $860 million to $870 million, above the $828 million analyst view. Adjusted earnings were guided to $385 million to $395 million versus $368 million expected.
Global daily active unique users rose 18% year over year to 130.3 million. U.S. DAUq rose 6% to 53.2 million. Average revenue per user was $6.18 globally and $11.85 in the U.S. "Other revenue," including data licensing with partners such as OpenAI and Google, grew 24% to $43 million.
Even so, Yahoo Finance noted Reddit shares remain about 23% lower year to date, underscoring how sensitive RDDT stock is to any hint that search-driven discovery is slipping.