Reddit Stock Sinks as Search Referral Traffic Concerns Weigh on Investor Sentiment

Key Stats for Reddit Stock

• YTD price change for Reddit stock: -34%
• $RDDT Stock Price as of Aug. 10: $159
• 52-Week High: $283
• $RDDT Stock Price Target: $227

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What Happened?

Reddit (RDDT) stock dropped sharply following its Q2 results and is now down 34% in 2026. That’s a strange reaction given the numbers.

Reddit beat on both revenue and earnings, and guidance for the next quarter came in well above what Wall Street expected too.

• Earnings per share hit $1.25, crushing the 96-cent estimate.
• Revenue reached $805 million, up 61% year over year, marking the eighth straight quarter of 60%-plus growth against the $730 million estimate.
• Net income jumped to $253 million from just $89 million a year ago.
• Reddit even guided next quarter’s revenue to $860 million to $870 million, well above the $828 million analysts had penciled in.

So why did Reddit stock fall despite all that? The answer is one line in the company’s investor letter: “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter.”

That single comment reignited a worry that’s been building on Wall Street for a while now: that Reddit depends too heavily on Google to bring in new users, and that traffic source is becoming less reliable.

This concern isn’t new. Reddit shares had already tumbled earlier this month after reports surfaced that the company was considering cutting off Google’s access to its data, following complaints that Google’s AI-powered search overviews are reducing the traffic it sends back to publishers and sites like Reddit.

CEO Steve Huffman addressed the tension directly on the call, saying the company hasn’t yet found a “win-win” with Google’s AI overviews, and that there’s no simple binary decision to make here.

Still, Reddit’s actual user numbers looked healthy. Global daily active users grew 18% year over year to 130.3 million, ahead of estimates. U.S. daily users rose 6% to 53.2 million.

Average revenue per user climbed to $6.18 globally.

Huffman emphasized that Reddit is focused on building direct, repeat usage through its own app rather than relying on drive-by search traffic, and pointed to new app user retention being up 50% year over year as evidence that this strategy is working.

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What the Market Is Telling Us About Reddit Stock

When a company beats earnings, beats revenue, and guides higher, but the stock still drops double digits, it tells you exactly what investors are worried about.

The market isn’t questioning Reddit’s current performance. It’s questioning the durability of the traffic pipeline that feeds it.

Reddit’s management is confident that direct app usage, not search referrals, is what actually drives the business long term.

But until investors see clear proof that Reddit can keep growing without leaning on Google, this search-traffic worry is likely to keep following Reddit stock, even on quarters as strong as this one.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!