Reddit just posted one of its best quarters ever. Revenue rose 61% year over year, and profit more than doubled. Guidance topped what Wall Street expected, yet the stock still dropped.That disconnect tells you something important about how investors are thinking about Reddit (RDDT) right now, and it has almost nothing to do with the numbers everyone expected to matter.Reddit’s earnings beat the numbers but missed the moodIn Q2 of 2026:Reddit reported revenue of $805 million, up 61% from a year earlier. Net income came in at $253 million, or $1.25 per diluted share, compared with $89 million a year ago. Earnings per share of $1.25 sailed past the $0.95 analysts had penciled in, and revenue cleared the $730 million estimate with room to spare, according to CNBC. Guidance looked even stronger. Reddit told investors it expects third-quarter revenue between $860 million and $870 million, above the $854 million consensus, along with adjusted earnings of $385 million to $395 million. By almost any measure, that is a strong report. Yet Reddit shares are down 23% at the time of writing, after the company flagged one phrase in its investor letter: search referrals were choppy.That single line, more than the earnings beat itself, is what moved the stock.Google search referral traffic declines in Q2Reddit has spent years building a business that leans heavily on people arriving through Google search. When someone types a question in Google, and a Reddit thread shows up in the results, that click often turns into a new Reddit user. As Google leans harder into AI-generated answers instead of the traditional list of links, fewer of those clicks make it through to Reddit. More AI:Workers just sent AI companies an ultimatumPalantir CEO has a blunt verdict on OpenAI and AnthropicElon Musk pulls no punches with AI rivals as Grok 4.5 debutsCEO Steve Huffman addressed the issue directly on the earnings call, stating:”Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter. But the bigger picture is unchanged. The commercial business is strong, our revenue growth is differentiated, and we have much to be encouraged by on the product side.”Investors have watched this worry play out before. Earlier this year, Reddit shares tumbled after reports that the company was weighing whether to cut off Google’s access to its data entirely. Reddit has raised concerns that referral traffic keeps shrinking as Google pushes its own AI chat tools instead of sending users elsewhere.In the Q1 earnings call, Huffman had a message for the AI giants and stated:”There is no artificial intelligence without actual intelligence. And that comes from Reddit.”
Reddit CEO Steve Huffman is not too worried about Google trafficSpencer Platt/Getty Images
Reddit DAUs climb as direct app engagement growsReddit’s leadership team argues the company’s future does not depend on search traffic at all. Instead, they point to daily active users who come directly to the app and stick around.Global daily active unique users rose 18% from a year earlier to 130.3 million, ahead of analyst estimates of 129.9 million, as per CNBC. Moreover, average revenue per user rose to $6.18, up from $4.53 last year. Chief operating officer Jen Wong said the advertising business is benefiting from that direct traffic, not the search-driven kind.Related: Reddit CEO delivers bold warning to Google and OpenAI”Our influence in the purchase decision journey is clear,” Wong said on the call. “Increasingly, they realize that their customers are putting an increasing value on human advice, and Reddit is the place for that.”Huffman went further, arguing that new app user retention rose 50% year over year on a relative basis, a sign the company’s own product changes, not Google, will determine where Reddit goes next.”We’re not building Reddit for that drive-by traffic,” Huffman told analysts. “We’re building Reddit for direct usage. And that’s where our business lives.”The bigger picture for RDDT stockFor now, the market seems less interested in the beat and more focused on the risk sitting underneath it. Reddit’s ad business, its data licensing deals with partners like OpenAI and Google, and its long-term goal of reaching 1 billion daily users worldwide all still depend, at least partly, on how much of the open web keeps sending people its way.CFO Drew Vollero noted the company crossed $1 billion in operating cash flow on a trailing 12-month basis for the first time, a sign of financial strength even as the traffic question lingers.Reddit bets that its own product, not Google’s search results page, will decide its future. Whether Wall Street believes that bet will likely keep swinging the stock long after this earnings report fades from memory.Related: Reddit may have a search edge social rivals lack