Reddit's $805M quarter can't calm investors spooked by 'choppy' Google traffic

Reddit just posted a monster quarter. Revenue hit $805 million, a 61% leap. Net income soared to $253 million. The company even told Wall Street to expect $860 to $870 million next quarter. That’s the kind of beat-and-raise performance that normally sends a stock flying. Instead, shares cratered over 10% after hours.

The culprit wasn’t hidden in the financials—it was in CEO Steve Huffman’s letter to shareholders. “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter,” he wrote. That one sentence confirmed what investors have been quietly dreading: Google’s AI summaries are starting to eat Reddit’s lunch. The irony is thick. Reddit signed a deal last year to feed its content to Google for AI training, and now that same AI might be reducing the number of people who actually click through to Reddit.

On the earnings call, analysts didn’t dance around the issue. One bluntly called it a “user problem” and pressed Huffman on whether Reddit would even renew its data licensing deals with Google and OpenAI next year. The daily active user numbers in the U.S. back up the concern—they dipped from 53.5 million to 53.2 million quarter-over-quarter, a small but symbolic decline. Logged-out users, the kind who arrive via search, are the ones under pressure.

Huffman deflected. He talked up Reddit’s “communities and conversation” and insisted the human element would keep people coming. On the Google relationship, he was vague to the point of evasive. “I don’t think there’s a binary outcome,” he said. That’s not the kind of clarity that calms a selloff. For a company that just reported its best financial quarter ever, Reddit suddenly looks like a business caught between the lucrative data deals feeding the AI beast and the possibility that the same beast renders its search traffic irrelevant.