Reddit gains 61% more but sinks in the stock market due to fear that AI will take away search traffic

Reddit yesterday presented results that, on paper, should have been cause for celebration. The company invoiced 805 million dollars in the second quarter, 61% more than a year ago, with a net profit of 253 million, 183% higher. Both figures exceeded Wall Street forecasts, and the company itself also raised its forecast for the next quarter. Despite everything, its shares fell more than one 10% outside market hours.

The reason must be found in a phrase from the letter to shareholders from the CEO, Steve Huffman. According to The VergeHuffman wrote that referrals from search engines were “irregular” during the quarter, with traffic becoming more volatile towards the end of the period, although it insisted that the underlying commercial business remains strong.

The shadow of Google’s AI summaries

Investors’ fear is the responses generated by artificial intelligence that Google shows directly in its search engine. Reddit signed a contract in 2024 to transfer its content to Google for AI training purposes, but that same content is now what feeds the AI Overviews and the search engine’s AI Mode, two tools that resolve the user’s query without the need for them to visit the original website.

Reddit further acknowledges that It is not clear if it will renew that agreement with Google. Asked directly by an analyst about whether there is any scenario in which the company stops licensing data to Google and OpenAI next year, Huffman was deliberately ambiguous: “I don’t think there’s a binary outcome. We’ll make sure we maximize the value for Reddit.”

Users in the United States: Reddit is no longer growing, but going down

The numbers by region also do not help to dispel doubts. Although Reddit’s global users are growing, unique daily users in the United States They fell slightly, from 53.5 to 53.2 million compared to the previous quarter. It is precisely the market where traffic from searches weighs the most, and where it is most noticeable if Google begins to divert clicks towards its own responses generated by AI.

During the conference with analysts, one of them was especially direct: “Investors’ feeling is that you have a user problem, especially in the United States,” he said, pointing out that logged-in user traffic could come under pressure as search shifts toward AI.

Huffman responded appealing to the human component of the platform. He mentioned: “Reddit is about communities and conversation. Communities are universal, so we believe we have content for everyone in the United States. It’s about making it visible.” An answer that sounds convincing on paper, but that does not clear up the underlying doubt, namely, if search engines stop sending visitors, that content will have to find an audience through another means.