📰 Key Highlights

Reddit reported Q2 earnings with total revenue of $805M, up 61% YoY, and net income of $253M, up 183% YoY — both beating Wall Street expectations. Next quarter revenue guidance of $860M to $870M also exceeded market estimates. On paper, a beat like that should push the stock up, but the stock actually plunged more than 10% in after-hours trading. The main reason: CEO Steve Huffman mentioned in his shareholder letter that search engine traffic this quarter had been “choppy,” with more pronounced volatility toward quarter-end, though he emphasized that overall business performance remains strong. His comments made it clear that AI is reshaping the search ecosystem, and investors are worried that Reddit’s traffic could take a hit. Reddit signed a deal with Google in 2024 to provide content for AI training, but Google’s recently launched AI summary features seem to be stealing some reader traffic from Reddit. The company also hinted that it hasn’t decided whether to renew this partnership. User growth is showing similar concerns: although Reddit’s global user count continues to grow, US daily active users slipped slightly from 53.5M in Q1 to 53.2M. On the earnings call, analysts directly challenged Huffman on AI’s impact on Reddit users, even pressing him on whether “there’s a possibility that next year you won’t license data to Google and OpenAI.” Huffman didn’t give a clear answer, only saying that Reddit’s relationship with Google predates any formal data licensing agreement, so the outcome isn’t binary, and the company will make sure Reddit’s interests are maximized. As for user stickiness, he emphasized that the community and conversational nature of Reddit is what keeps users coming back, and that the US market still has untapped content potential.

💬 JudyAI Lab’s Take

Reddit’s Q2 earnings beat expectations on both revenue and net income, yet the stock plunged more than 10% after-hours. The key trigger was the CEO flagging search engine traffic as “choppy” — a clear signal that AI is reshaping the traditional search landscape.

The paradox in this earnings report carries an important signal for AI builders: the relationship between content platforms and AI companies is shifting from “partnership” to “uncertainty.” Reddit licensed its content to Google for AI training in 2024, but now risks losing reader traffic to Google’s AI summaries, while US daily active users have also dipped slightly. This shows that when AI serves answers directly to users, content platforms that rely on external inbound traffic face a two-sided squeeze — they have to serve as training data sources for AI while also watching AI take away their visitors. For anyone building an AI product, this is a wake-up call: if your product is built on top of someone else’s platform traffic or data licensing, that upstream uncertainty is a risk factor you have to factor in.

A direction worth thinking about: audit whether your product is overly dependent on a single data source or traffic channel, and plan alternatives ahead of time.

📅 Source Info

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