Reddit reports solid quarter but shows signs of AI impact

Reddit reported Q2 revenue of $805 million (up 61% YoY) and net income of $253 million (up 183%), beating Wall Street estimates. It forecast Q3 revenue of $860-870 million. However, shares fell over 10% in after-hours trading after CEO Steve Huffman warned in a shareholder letter that search referrals were "choppy" and traffic became more volatile later in the quarter. AI-powered search summaries from Google and OpenAI are reducing referral traffic to Reddit. Reddit signed a data licensing deal with Google in 2024, but it is unclear if it will be renewed. U.S. daily active users slightly declined to 53.2 million from 53.5 million in Q1. Huffman argued that Reddit's human communities make it a destination, but was non-committal about extending the Google deal, saying "we will make sure that we’re maximizing the value for Reddit."