Reddit posts $805M Q2, but 'choppy' search referrals tank stock

The clean version of Reddit's Q2 was excellent. The version investors reacted to was not. According to CNBC's report on the print, revenue came in at $805 million, up 61% year over year and well ahead of the $730.4 million analysts expected, with EPS of $1.25 against a $0.95 consensus and net income of $253 million. Q3 guidance landed at $860 to $870 million, above the $829.1 million Street estimate. Daily active uniques rose 18% to 130.3 million, ad revenue climbed 74% to $625 million, and active advertisers grew more than 75%. On any normal quarter that is a straight beat.

The stock still fell about 11% after hours, and the reason lives in one sentence from the investor letter. CEO Steve Huffman wrote that "search referrals were choppy in the quarter, and traffic was more volatile later in the quarter, but the bigger picture is unchanged: the commercial business is strong." COO Jen Wong told analysts that "SEO headwinds" from search algorithm changes "more than offset" some of the company's own user acquisition work. Huffman added that on AI Overviews specifically, Reddit and Google have "yet to find that win-win." Investors read the top-line beat, and then they read that, and the second line won.

Why that matters beyond one earnings print: Reddit is one of the cleanest public reads on what Google's Gemini-powered answers are doing to the wider referral economy. If a site whose threads are among the most-linked destinations from search is calling the referral pipe volatile, every ad-supported publisher downstream should assume a similar shape. The reason the commercial business held up here is that the ad flywheel, with adjusted EBITDA of $343 million and an advertiser base up over 75%, is now big enough to absorb some top-of-funnel wobble for at least a quarter.

The honest caveat is that the reporting does not tell you what share of those 130.3 million daily uniques actually enters through Google, how quickly that mix is shifting, or what "collaborative" talks with Google look like on timeline or terms. It also does not confirm whether Wong's SEO headwind is a one-quarter algorithm move or the new baseline.

If it is the new baseline, the interesting move is the one Wong hinted at, that people are increasingly using Reddit to validate what an LLM told them. Lower-volume, higher-intent traffic that monetizes better per user is a defensible place to land, and it is a different pitch to advertisers than being a Google spillover. That is the story Reddit will need to tell for a few quarters before the market re-rates the referral risk.