Reddit Stock Drops 11% Despite Strong Q2 Earnings Beat

Reddit shares tumbled roughly 11% after the company disclosed that search referral traffic had turned "choppy," spooking investors despite second-quarter financial results that surpassed Wall Street expectations on both revenue and earnings per share.

The social media platform delivered a top-and-bottom-line beat for Q2, along with a forward revenue forecast that also cleared analyst estimates — a trifecta that would typically send shares higher. Instead, the search-traffic warning overshadowed the headline numbers, signaling that a key growth driver may be losing momentum.

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Search referrals are a critical source of new user traffic for Reddit, which has invested heavily in making its content more discoverable via Google and other search engines. Any sign of instability in that channel raises questions about the company's ability to sustain audience growth, and by extension, advertising revenue — its primary income stream.

The selloff reflects a broader investor sensitivity to user-growth metrics in the current ad market environment, where platforms are being held to tight standards on engagement and traffic quality. Even a company that beats earnings estimates can face punishment when forward-looking signals suggest underlying vulnerabilities.

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