Reddit Stock Tumbles on Search Traffic Warning Despite Earnings Beat

Reddit Inc. (RDDT) shares plunged 10.7% in after-hours trading Tuesday, as a warning about uncertain user traffic from search engines overshadowed a second-quarter earnings report that beat Wall Street estimates on all key metrics.

Strong Results, Weak Reaction

The social media company reported strong financial performance for the second quarter of 2026, surpassing analyst expectations. According to the release, key figures included:

• Revenue: $805 million, compared to the consensus estimate of $730 million.
• Earnings Per Share (EPS): $1.25, beating the expected 95 cents.
• Q3 Revenue Guidance: A forecast of $860 million to $870 million, which was also above the analyst consensus of $828 million.

Despite the robust results, the positive financial data was not enough to prevent a sharp selloff in the company's stock, which fell to $159 in extended trading.

Search Referrals and AI Deals in Focus

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The primary driver for the negative investor sentiment was a disclosure in Reddit's shareholder letter stating that "Search referrals were choppy." This comment amplified long-standing concerns about the company's significant reliance on search engines like Google for user discovery and growth.

Adding to the cautious mood, the company did not announce any new data licensing agreements. Investors have been closely monitoring this area for growth, particularly following Reddit's existing AI content deals with Google and OpenAI. The company’s “Other revenue” segment, which includes this business, grew 24% year-over-year to $43 million.

Broader Industry Context

The selloff occurred amid a challenging environment for ad-supported social platforms. The previous day, Meta Platforms saw its stock decline after issuing a weaker-than-expected forecast, even as it reported strong revenue growth. This created a difficult backdrop for peers like Reddit, putting a spotlight on future growth prospects over past performance.

The broader market provided little support, with the S&P 500 and Nasdaq Composite finishing the day nearly flat. Reddit's after-hours decline highlights a classic case where a forward-looking risk—in this case, the stability of its user acquisition funnel—can outweigh an otherwise strong quarterly report.