Reddit revenue jumps in Q2, but search traffic turns uneven

In short: Reddit posted strong second-quarter results, but investors focused on a warning that search engine traffic has become less predictable.

What happened

Reddit said it had a strong second quarter, with total revenue of $805 million, up 61% from a year earlier. Net income was $253 million, up 183%. The company also told investors it expects $860 million to $870 million in revenue next quarter.

Even with those results, Reddit’s stock fell more than 10% in after-hours trading. The reason was a note from CEO Steve Huffman saying that “search referrals were choppy” and that traffic became more volatile later in the quarter. Search referrals are visits that come from people clicking a link after using a search engine.

Some analysts tied this to the growing use of AI in search. Many search engines now show AI-written summaries at the top of results, which can answer a question without sending a person to another website (like reading a book’s summary instead of checking out the book). If fewer people click through to Reddit, Reddit can lose visitors, especially visitors who are not logged in.

Reddit’s user numbers also raised questions. Global daily users were up, but U.S. daily active unique users slipped slightly to 53.2 million, down from 53.5 million in the prior quarter.

Why it matters

Reddit makes much of its money from ads, and ads depend on people visiting the site. If AI features in search keep more people on Google and away from Reddit, Reddit may need other ways to bring in visitors, and it may rethink deals like its 2024 agreement to license Reddit content to Google for AI training.

Source: TechCrunch AI