Reddit Beats Q2 Estimates But Stock Drops on Google Traffic Warning

Reddit posted a strong second quarter in 2026, beating Wall Street on both revenue and earnings while issuing guidance well above expectations — yet the stock still fell roughly 11% as investors fixated on a disclosure that Google search referrals had turned volatile. Revenue surged 61% year-over-year to approximately $805 million, marking the eighth consecutive quarter of 60%-plus growth. Net income nearly tripled to $253 million, or $1.25 per share, up from $89 million and 45 cents a year earlier.

The earnings beat was broad-based. Daily active unique users climbed 18% year-over-year to 130.3 million globally, just edging past analyst forecasts of 129.9 million. U.S.-specific daily users rose a more modest 6% to 53.2 million, reflecting that international expansion is doing most of the heavy lifting. Average revenue per user came in at $6.18 globally and $11.85 in the U.S. Free cash flow more than doubled to $261 million from $111 million a year ago — a sharp contrast to rival Meta, which saw cash flow squeezed by massive AI infrastructure spending.

For Q3, Reddit guided revenue to $860–$870 million and adjusted earnings of $385–$395 million, both above consensus estimates of $828 million and $368 million respectively. The data licensing business, which counts OpenAI and Google as its two largest partners, grew 24% to $43 million — a meaningful but not dominant slice of total revenue.

The central anxiety for investors is Reddit's dependence on Google for user acquisition. CEO Steve Huffman acknowledged that search referrals were choppy and traffic turned more volatile late in the quarter — language that spooked markets even as he insisted the commercial business remains strong. The concern has been building: earlier in July, reports surfaced that Reddit was weighing whether to cut off Google's access to its data, as the search giant's Gemini-powered AI Overviews increasingly serve answers directly without routing users to Reddit. Huffman struck a measured tone, saying the two sides have yet to find a mutually beneficial arrangement but that no binary decision has been made.