Published on: 2026-08-03
Reddit delivered one of the strongest quarters in its public-market history. Revenue rose 61% to $804.9 million, diluted earnings reached $1.25 per share, and third-quarter guidance exceeded Wall Street expectations. RDDT nevertheless closed 20.99% lower at $140.67 on Friday, July 31, after investors focused on a sequential decline in US daily users and management’s limited visibility into search traffic.
RDDT closed Friday at $140.67, down 20.99%. Replace this bullet with Monday’s opening price and early percentage move.
Reddit’s revenue rose 61% to $804.9 million, while diluted EPS of $1.25 beat expectations near $0.97.
US daily users fell from 53.5 million in Q1 to 53.2 million in Q2, weakening the growth story in Reddit’s most valuable market.
Logged-out users grew 27%, compared with 7% growth for logged-in users, while management described search referrals as volatile and difficult to forecast.
Reddit raised its Q3 guidance, although stronger monetisation did not answer where future high-value audience growth would come from.
The selloff did not come from a weak earnings report. Revenue beat the roughly $732 million expected, while diluted EPS topped estimates near $0.97. Reddit also reported $253 million in net income and $261 million in free cash flow, confirming that the improvement extended beyond adjusted earnings.
Metric |
Result |
|---|---|
Revenue |
$804.9M, up 61% |
Diluted EPS |
$1.25 |
US daily users |
53.2M, down from 53.5M in Q1 |
Q3 revenue outlook |
$860M–$870M |
RDDT Friday close |
$140.67, down 20.99% |
Advertising revenue grew 64% to $762 million, and global daily users increased 18% to 130.3 million. Reddit then guided for third-quarter revenue of $860 million to $870 million, above the previous consensus near $828 million. Nearly every headline number pointed to another strong quarter, yet the stock lost one-fifth of its value.
The weakness appeared in the US audience data. US daily active users increased 6% from a year earlier, although the quarterly average slipped from 53.5 million in Q1 to 53.2 million in Q2. International daily users continued to expand, lifting Reddit’s worldwide total to 130.3 million.
A decline of 300,000 users is small against Reddit’s global audience. Its location gave it more weight. Reddit generated average revenue per user of $11.85 in the US, compared with $2.26 internationally, making the domestic audience more than five times as valuable by that measure.
Reddit earned much more from its audience while the number of Americans using the platform every day moved backwards. The drop interrupted an otherwise clean story of rapid audience growth and stronger advertising returns.
The quality of Reddit’s audience added a second concern. Logged-in daily users grew 7% worldwide, while logged-out users increased 27%. Search visitors may arrive for one answer and leave, while logged-in and app users are more likely to return, engage with communities and generate repeat advertising value.
CEO Steve Huffman said direct and app users are worth several times more than search-referral traffic. Management also said search referrals were uneven during the quarter, became more volatile later in the period and remained difficult to forecast.
The clearer concern was management’s limited visibility into future referrals. Reddit cannot control how search engines rank links, display AI-generated answers or change the amount of traffic sent to outside websites. Reddit did not quantify the effect of AI-generated search results.
Logged-out users are not necessarily Google visitors, and Reddit does not disclose how many arrive through search, shared links or direct browsing. Even so, logged-out users grew far faster than logged-in users, leaving more of the company’s growth outside its most valuable engagement channels.
Reddit’s Q3 revenue outlook showed no immediate slowdown in advertising demand. The $860 million to $870 million range was above the previous consensus near $828 million.
The concern sat further ahead. Revenue grew 61% while daily users grew 18%, partly because global revenue per user increased 36% to $6.18. Reddit is monetising its existing audience more effectively, especially in the US, where average revenue per user rose 51%.
Stronger monetisation can keep lifting revenue, though it becomes harder to carry the full growth story if the high-value US audience stalls. Higher Q3 guidance did not resolve the sequential slowdown in Reddit’s most valuable user market or the uncertainty surrounding search referrals.
RDDT fell because US daily users declined from the previous quarter and management reported volatile search referrals. Those concerns outweighed the revenue, earnings and guidance beats.
US daily users increased 6% from a year earlier, although the quarterly average slipped from 53.5 million in Q1 to 53.2 million in Q2.
Search is an important discovery channel, though Reddit does not disclose exactly how much traffic comes from Google. Management said visibility into referral traffic remained low.
Advertising generated $762 million of Reddit’s $804.9 million quarterly revenue. Other revenue, including data licensing and premium services, contributed $43 million.
Reddit has proved that it can earn more from its existing audience. The next test is whether it can expand its highest-value audience while reducing its reliance on unpredictable search referrals.
US daily users, logged-in growth and direct app engagement may matter more to investors than another strong earnings beat. Revenue can continue rising through better advertising monetisation, but the growth story will remain under pressure until Reddit shows that more users are choosing to return directly.
