Reddit Reports Strong Q2 But Shares Slide Amid Search and AI Concerns
Social platform Reddit reported a strong second quarter with $805 million in revenue, an increase of 61% year-over-year. Despite beating financial expectations, its stock fell over 10% in after-hours trading. CEO Steve Huffman warned investors about volatile search traffic caused by AI search summaries. This highlights growing friction between major web publishers and tech giants over automated content aggregation.
Key points
- Reddit, the online social discussion platform, reported a second-quarter total revenue of $805 million, marking a 61% jump compared to the previous year.
- The company posted a net income of $253 million, up 183%, and projected next-quarter revenue between $860 million and $870 million, beating Wall Street expectations.
- Despite strong financial results, Reddit stock slid over 10% in after-hours trading following CEO Steve Huffman's warning regarding choppy search engine referrals.
- Huffman criticized Google's AI Overviews for failing to drive positive traffic growth equivalent to traditional organic search results and questioned the future of the platform's content partnership with Google.
- Reports indicate Reddit is reconsidering its relationship with Google regarding its 2024 AI training contract, reflecting broader publisher discontent with automated search summaries.
Social media and discussion platform Reddit announced its financial results for the second quarter, posting $805 million in total revenue and representing a 61% increase compared to the same period last year. Net income reached $253 million, achieving an 183% rise that surpassed Wall Street projections. Additionally, the company forecasted third-quarter revenue between $860 million and $870 million, exceeding standard market guidance.
Despite the positive financial figures, Reddit's stock dropped by more than 10% in after-hours trading. The sell-off followed disclosures from CEO Steve Huffman regarding volatile and choppy traffic patterns originating from search engines late in the quarter. Huffman pointed to changes in the search landscape driven by artificial intelligence, specifically criticizing Google's AI Overviews for failing to generate the same level of ecosystem value as traditional blue-link search results.
The friction underscores mounting tension between digital publishers and search engine operators deploying automated summaries. Reddit previously entered into a contract in 2024 to supply its data for Google AI training, but executives have signaled uncertainty regarding whether they will renew the partnership. Industry observers note that AI-generated summaries may be retaining users on search platforms rather than directing traffic to source websites, leaving publishers searching for sustainable traffic models.
Sources
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