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Reddit delivered a strong second quarter, reporting rapid revenue growth, higher profits and a larger global audience. But investors focused less on the financial beat and more on a warning that search-engine referrals had become unstable as AI-generated answers reshape how people find information online.
The company reported $805 million in second-quarter revenue, up 61% from the same period last year. Net income rose 183% to $253 million, while adjusted EBITDA more than doubled to $343 million. Advertising remained the company’s core business, generating $762 million in revenue, a 64% year-over-year increase.
Despite those figures, Reddit shares fell sharply after the results. The market reaction showed that investors are paying close attention to the platform’s dependence on search traffic, especially as Google and other search products place AI summaries above traditional links.
Strong Revenue, Nervous Market
Reddit’s quarter showed clear commercial momentum. The platform continued to grow its advertising business, improve profitability and expand internationally. International revenue rose 84% to $167 million, while U.S. revenue increased 56% to $638 million.
The company also reported a gross margin of 91.3% and said it had crossed $1 million in trailing revenue per employee. That gave management a strong efficiency story to tell investors.
But the strength of the quarter was overshadowed by one concern: search referrals. Reddit CEO Steve Huffman told shareholders that product improvements and consumer marketing had helped offset weaker traffic from search, but acknowledged that “search referrals were choppy in the quarter.”
That phrase became one of the most important parts of the earnings discussion because Reddit has long benefited from users landing on discussion pages through search engines.
Logged-Out Users Are Exposed
Reddit’s global daily active uniques rose 18% year over year to 130.3 million, while weekly active uniques climbed 24% to 514.6 million. The platform now reaches more than half a billion weekly users.
The risk sits inside the user mix. Reddit has a large logged-out audience, many of whom arrive from Google after searching for product advice, personal experiences, troubleshooting help, reviews or community discussions.
In the second quarter, Reddit reported 77.7 million global logged-out daily active uniques, compared with 52.6 million logged-in daily active uniques. In the United States, logged-out daily users reached 30.1 million, ahead of 23.1 million logged-in users.
That matters because U.S. users are much more valuable to Reddit’s ad business. Average revenue per user was $11.85 in the United States, compared with $2.26 internationally and $6.18 globally.
If AI search summaries reduce the number of people clicking through to Reddit threads, the platform could face pressure in one of its most valuable traffic channels.
The AI Search Problem
Reddit has a complicated relationship with AI companies. Its user-generated discussions are valuable because they contain real opinions, niche advice, product comparisons, personal stories and community debates. That makes Reddit content useful for training, retrieval and AI-generated answers.
But the same AI systems that benefit from Reddit’s content may also reduce visits to Reddit itself. If a search engine can summarize a Reddit thread directly on the results page, some users may get enough information without opening the discussion.
That is the central tension investors are now watching. Reddit can earn money through advertising and data licensing, but AI search could weaken the open-web discovery path that has helped bring millions of casual visitors to the platform.
Reddit Defends Human Conversation
Reddit’s response is to position human discussion as something AI cannot fully replace. Huffman has argued that people do not simply want summaries of Reddit. They want Reddit itself.
The company is betting that users will continue to value first-hand experiences, disagreements, community identity and direct participation. To support that strategy, Reddit has been improving feed models, encouraging more visitors to install the app and adding features such as video in comments, easier posting flows and interactive experiences.
The goal is to make Reddit less dependent on drive-by search visits and more like a daily destination where users return directly.
AI Also Helps the Ad Business
AI is not only a threat for Reddit. The company is also using AI to support its advertising business.
Reddit has been developing tools that help advertisers create platform-specific copy, identify effective creative patterns, measure post-ad actions and target users based on communities and interests. The strong growth in ad revenue suggests that marketers are still spending heavily on the platform.
The unanswered question is whether Reddit’s AI-related revenue opportunities, including data licensing, can offset any long-term loss in search-driven traffic.
Third-Quarter Outlook Remains Strong
Reddit guided for third-quarter revenue between $860 million and $870 million, with adjusted EBITDA expected between $385 million and $395 million. That forecast suggests management does not expect search volatility to derail near-term growth.
Still, the stock-market reaction shows that investors are looking beyond one strong quarter. The bigger question is whether Reddit can keep growing if AI search reduces the number of users who click through from traditional search results.
Reddit’s business is healthier than the selloff suggests. But its future now depends on proving that human conversation remains valuable enough to survive a search world increasingly shaped by AI summaries.