Shares of Reddit tumbled 11.9% to $156.80 the day after the company delivered what looked like a blowout second quarter, raising a sharp question: when the numbers are this good, is the selloff about what the company said — or what it didn't?
Every Financial Metric Beat the Street, and It Wasn't Close
Reddit delivered $805 million in revenue, up 61% year-over-year, and net income of $253 million.
Earnings per share hit $1.25 versus analyst estimates of $0.96 — a 29.6% beat.
Adjusted EBITDA reached $343 million, representing a 43% margin — up from 40.1% last quarter. Free cash flow more than doubled to $261 million from $111 million a year ago. The company is now sitting on $2.8 billion in cash and marketable securities. These are not incremental improvements; they are the numbers of a business scaling profitably and fast.
The Google Problem Spooked Investors More Than Guidance Excited Them
Reddit's shares sank after it revealed in an investor letter that "search referrals were choppy," a euphemism for declining traffic from Google. Weeks earlier, Reddit's stock had already dropped 9% after reports it was reconsidering its AI data licensing deal with Google. Together, the signals suggest Reddit's relationship with its most important distribution partner is in flux. For a platform that depends on search engines to funnel new users into its communities, that's a real vulnerability — even if the ad engine is firing.
User Growth Is Slowing Even as Revenue Per User Surges
Reddit added 2.9 million domestic daily active visitors in Q2, a 5.8% year-over-year growth rate — lower than its two-year trend, suggesting new initiatives aren't accelerating user growth yet. But ARPU — the average revenue earned per user — hit $11.85, up 50.6% year-over-year. Reddit is squeezing more dollars from each visitor through better ad targeting and international expansion, but the question is how long that lever works without a bigger audience.
The Stock Was Already Priced for Perfection After a Pre-Earnings Rally Reddit ran from $168.73 on July 24 to $178.07 by the close on earnings day — a 5.5% surge in four sessions. The stock pulled back in after-hours trading following a rapid run-up into the print.
Q3 revenue guidance of $860–$870 million topped the $828 million consensus , but investors who bought the rumor sold the news. With the stock still down roughly 25% year-to-date despite eight consecutive quarters of 60%-plus growth, the debate is no longer about execution — it's about whether choppy Google traffic can derail the ad story before Reddit finds its own path to users.