What Happened?
Shares of online community and discussion platform Reddit (NYSE:RDDT) jumped 11% in the afternoon session after investors revisited the company's strong second-quarter earnings results, prompting a rebound from a recent sell-off. The stock had previously fallen more than 20% after the earnings release, despite the company beating estimates.
That drop was fueled by investor fears over "choppy" search referral traffic from Google and the absence of new AI data licensing deals. However, the underlying results were strong, with second-quarter revenue climbing 61% year-over-year to approximately $805 million. Furthermore, the company issued an upbeat third-quarter revenue forecast of $860 million to $870 million, which surpassed Wall Street's expectations of around $830 million, encouraging investors to look past the initial concerns.
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What Is The Market Telling Us
Reddit’s shares are extremely volatile and have had 52 moves greater than 5% over the last year. But moves this big are rare even for Reddit and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 23.2% on the news that Reddit's strong second-quarter earnings report was overshadowed by concerns that changes to Google's AI search could threaten its user traffic and growth. Despite delivering revenue of $804.9 million, a 61.1% year-over-year increase, and stronger-than-expected profits, the company's stock fell sharply.
The main concern for investors was uncertainty around how users will find Reddit as Google increasingly uses AI-generated summaries instead of traditional search links. This change threatens Reddit's referral traffic, a key source of its audience. The issue was highlighted by slowing domestic daily active user growth of 5.8% and CEO Steve Huffman's comment that search referrals had become “choppy” during the quarter.
Reddit is down 35.4% since the beginning of the year, and at $156.26 per share, it is trading 42.3% below its 52-week high of $270.71 from September 2025. Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $3,098.
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