Reddit reported second-quarter earnings of $1.25 per share on revenue of $805 million, both surpassing analyst estimates of 95 cents and $730 million, respectively. The company's revenue grew 61% year-over-year, marking the eighth consecutive quarter of over 60% growth, driven by its expanding ad business and a surge in new users.
Despite this strong performance, Reddit's shares declined after CEO Steve Huffman noted in an investor letter that 'search referrals were choppy,' raising concerns about the company's dependence on Google for user traffic. The company anticipates third-quarter revenue between $860 million and $870 million, exceeding the $828 million expected by analysts.
Additionally, Reddit's free cash flow more than doubled to $261 million, and its global daily active unique users rose 18% to 130.3 million. However, investor anxiety remains regarding Reddit's ability to effectively monetize its growing user base, especially as competition from AI-driven services like Google's Gemini increases.
Huffman acknowledged the volatility in traffic and indicated that the company is exploring its options regarding data access negotiations with Google, emphasizing the need for a mutually beneficial arrangement