Reddit (RDDT) reported its second-quarter 2026 earnings on July 30, delivering results that significantly exceeded analyst expectations on both revenue and earnings per share. The company posted revenue of $805 million, surpassing the $730 million expected by LSEG, and earnings per share of $1.25, well above the anticipated $0.95. This marked a 61% year-over-year increase in sales from $500 million a year earlier, and net income rose to $253 million, or $1.25 per share, compared to $89 million, or $0.45 per share, in the prior year [1].
Despite these strong financial results, Reddit's shares sank approximately 11% in after-hours trading. The decline was attributed to concerns highlighted in the company's investor letter, where CEO Steve Huffman noted that 'search referrals were choppy' during the quarter, reflecting volatility in traffic, particularly from Google. This raised investor worries about Reddit's reliance on Google for new user acquisition and the potential impact on future growth [1].
Reddit's guidance for the third quarter was also robust, with projected revenue between $860 million and $870 million, ahead of analyst expectations of $828 million. Adjusted earnings for the upcoming quarter are expected to be between $385 million and $395 million, exceeding Wall Street's projection of $368 million. The company's global daily active unique users (DAUq) increased 18% year-over-year to 130.3 million, surpassing analyst estimates of 129.9 million, while U.S. DAUq rose 6% to 53.2 million. Average revenue per user (ARPU) was $6.18 globally and $11.85 in the U.S. Reddit's 'Other revenue' segment, which includes data licensing to partners such as OpenAI and Google, grew 24% year-over-year to $43 million [1].
While Reddit's ad business continues to benefit from overseas expansion, new user growth, and improvements to its ad engine, the volatility in search referral traffic has overshadowed these positives. CEO Huffman emphasized that, despite the choppy search referrals, the company's commercial business remains strong and revenue growth is differentiated, with encouraging developments on the product side [1].
Earlier in the month, Reddit shares also experienced a decline following reports that the company was considering restricting Google's access to its data, further fueling concerns about the sustainability of search-driven traffic [1].
CONCLUSION
Reddit delivered a standout quarter with revenue and earnings far exceeding expectations, driven by strong user growth and expanding ad and data licensing businesses. However, investor concerns about volatile search referral traffic from Google led to a sharp 11% drop in the company's share price. The market remains cautious about Reddit's reliance on external search traffic for user acquisition, despite the company's optimistic outlook and robust guidance.