Reddit posted second-quarter revenue of $805 million, up 61 percent, with diluted earnings of $1.25 a share, free cash flow more than doubled to $261 million, weekly active uniques past half a billion at 514.6 million, and third-quarter guidance of $860 to $870 million above consensus. [2] The stock fell 12.5 percent in after-hours trading to about $156. [1]
The quarter was the company's eighth straight above 60 percent growth, and the market's answer was a sell-off — which is what makes the print worth reading twice, once as results and once as a repricing. The stated discomforts are specific: deceleration from the first quarter's 69 percent, cooling U.S. user growth, and the company's plan to stop reporting the logged-in versus logged-out user split after this quarter. [1] [3]
That last item is where the discourse lives. The split is the metric that separates Reddit's durable, account-holding users from the drive-by traffic search engines deliver — and the company is retiring it at exactly the moment logged-in U.S. growth flattens. [3] Fin-twit read the disclosure change as a confession. Management's commentary, carried on the earnings call, frames it as simplification. [3] Both readings fit the same fact pattern, which is why the after-hours tape settled the argument before the arguments could: a business trading on perfection cannot retire the lens its skeptics were watching.
The deceleration arithmetic explains the sensitivity. From 69 percent growth to 61 is still a number most companies would frame on the wall — but a multiple priced for acceleration re-rates on the second derivative, not the first. [1] Guidance above consensus did not save the print because guidance is a promise, and the metric retirement is a fact; the market weights them accordingly.
The deeper fear is not in the numbers at all. AI-generated search answers threaten the referral traffic that logged-out users represent, and the print contains no measurement of that threat — it is priced, not evidenced. [1] The irony is structural: Reddit's AI data-licensing deals with OpenAI and Google make it both customer and victim of the same shift, selling the training material that builds the answers that may stop sending the traffic. [2] No line item in Thursday's release can distinguish a business the shift feeds from a business it eats, because the same quarter's revenue contains both.
The counterweight deserves its sentence. Sixty-one percent growth with doubled free cash flow is not a dying business, and a June AWS addendum committing $880 million of cloud spend through June 2029 is a footnote about infrastructure cost, not a warning about solvency. [2] [3] The sell-off prices a disclosure change and an unmeasured threat against a quarter that beat on every printed line. [1]
What next quarter settles is concrete: what replaces the retired split, and whether AI answers measurably cut referral traffic in the second half. [3] Until the substitution arrives, the market has delivered its verdict on the only thing that changed Thursday — not the business, but the window into it.
-- THEO KAPLAN, San Francisco