Reddit reported a classic beat-and-react quarter in Q2 2026: revenue surged 61% to $805M and earnings per share came in at $1.25, comfortably ahead of the roughly $0.95 consensus. Yet the stock declined sharply, falling 22.8% to $137.44 as investors moved to price in risks the quarter did not resolve.
Key reported figures
- Q2 revenue: $805M vs $731M estimate
- EPS: $1.25 vs ~$0.95 estimate
- Q3 revenue guidance: $860M 60M vs $829M estimate
- Q3 EBITDA guidance: $385M 395M vs $369M estimate
- Daily active users, quarterly (DAUq): 130.3M, up 18% year over year
- Advertiser growth: 70% year over year
- "Other revenue": up 24% to $43M
On surface metrics, the quarter read well. Advertiser expansion was broad-based, driven by mid-market, small and medium business, and international advertisers accelerating simultaneously. Management's guidance for Q3 sat about 4% above consensus at the midpoint for both revenue and EBITDA, implying continued ARPU strength.
What investors were actually seeking before the print
Three pre-earnings questions framed investor expectations, and the results delivered mixed verdicts:
| Question | Verdict | Market read |
|---|---|---|
| Can ad revenue sustain >50% growth? | Yes | Bullish - advertiser growth 70% YoY, ARPU surging |
| Is user growth holding up? | Mixed | Cautious - DAUq 130.3M (+18% YoY) but US sequential slowdown |
| New AI licensing deals with Google/OpenAI? | None announced | Bearish - "Other revenue" only up 24% to $43M |
The most consequential gap was the lack of any announced licensing deal. Market participants had been anticipating a renewal or expansion of Google and OpenAI arrangements. Instead, management disclosed a "choppy search referrals" backdrop and provided no new AI licensing news, turning otherwise strong numbers into a sell-the-news event.
The Google overhang
A structural concern informed much of today's repricing. Management noted that Google AI Overviews began exerting a broader impact late in the quarter and into Q3. Reddit is intentionally steering mobile web visitors toward its app as a strategy to trade some DAUq for higher-quality engagement. That dynamic, combined with rising AI-driven referral pressures, created a material growth risk in the view of market participants.
Analysts diverged in their responses. DA Davidson maintained a Buy rating with a $200 target, highlighting that the Q3 guidance midpoint still beat consensus by about 4% despite DAUq headwinds and that ARPU is compensating. JPMorgan trimmed its target to $185 from $200 and kept a Neutral stance. KeyBanc remains more optimistic with an Overweight rating and a $225 target, modeling $3.24B in revenue for 2026 and applying an 18x 2028 EV/EBITDA multiple. InvestingPro's fair value stood at $209.37, implying roughly 52% upside from the $137.44 trading level.
Upcoming catalysts and scenarios
Investors will be watching a set of clear catalysts that can either validate the quarter's strength or amplify the risks:
- Google licensing deal renewal - outcome unknown; a deal could stabilize revenue and traffic, while no deal or reduced terms would signal structural weakness.
- EU AI Overview opt-out - a near-term regulatory lever that could help traffic if Reddit opts out, though opt-out may not fully offset the AI search shift.
- Q3 earnings - due around October 2026; key indicators will be DAUq stabilization and continued ARPU expansion.
- R-Max ad product scaling and international monetization - both are ongoing paths to ARPU gains but face execution risks and slower ramps than modeled.
- Any new AI licensing agreements - if secured, these would create a high-margin revenue stream; none were announced in this quarter.
Bottom line
Reddit's Q2 delivered robust top-line growth and healthy advertiser momentum, but the absence of fresh AI licensing announcements and evidence of Google AI referral impact produced a rapid reassessment by investors. At $137.44, the stock is trading below multiple analyst price targets, reflecting the market's decision to reprice Google-related traffic risk while awaiting definitive licensing outcomes and clearer user trends.
Summary of data points used in this report is limited to company-provided figures, analyst reactions, and market moves disclosed during the quarter.