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Reddit reports a solid quarter but shows signs of AI’s impact
Reddit reported strong second-quarter results, with revenue and profit exceeding expectations and upbeat guidance for the following quarter. However, its shares fell more than 10% after hours after the company warned that search-engine referrals had become uneven, reinforcing investor concerns that AI-driven search could reduce traffic to Reddit.
Revenue rose 61% year on year to $805 million and net income increased 183% to $253 million; Reddit forecast $860 million to $870 million in next-quarter revenue. Global usage increased, but US daily active unique users edged down from 53.5 million in the first quarter to 53.2 million, while CEO Steve Huffman said Reddit’s human communities would remain valuable and gave no firm answer on future data-licensing arrangements with Google and OpenAI.
In short
- Strong results were overshadowed by AI-related traffic concerns.
- Revenue reached $805 million, up 61% year on year.
- US daily users slipped slightly despite global growth.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Reddit’s results show strong revenue and profit growth, rising global usage and upbeat guidance, suggesting its communities remain valuable to users and advertisers. Uneven search referrals may be a temporary fluctuation, and the company could adapt as search changes; its value need not depend on any one source of traffic or data-licensing deal.
The case against
The fall in shares reflects a reasonable concern that AI-driven search could answer questions without sending users to Reddit, weakening a key route to its communities. Uneven referrals and a small decline in US daily users add uncertainty, while the lack of clarity on future licensing deals makes it harder to assess whether new AI-related revenue could offset lost traffic.
Explained simply
Reddit is a social media platform where users post content and discuss topics in community forums called subreddits. The company has been growing and recently became a public company, so investors now scrutinise its quarterly financial results. This story is about Reddit's latest earnings report and what it reveals about a challenge facing the company.
The concern centres on how AI-powered search engines like Google and OpenAI's tools might affect Reddit's business. These AI systems are trained on vast amounts of internet data, including Reddit's user-generated discussions and advice. If people increasingly turn to AI tools to find answers rather than visiting Reddit directly through search engines, the platform could lose valuable traffic and advertising revenue.
This matters because Reddit's appeal to advertisers and investors rests on its ability to attract large numbers of users who generate engagement and see adverts. Any significant decline in traffic from search engines would suggest the long-term health of the platform is at risk, even if current financial results look strong.