Reddit Delivers Strong Earnings, but AI Is Starting to Change the Game

Reddit reported $805 million in second-quarter revenue, a 61% year-over-year increase, easily surpassing analyst expectations. Daily active users climbed 18% to 130.3 million, while advertising revenue continued to surge as more brands embraced Reddit's AI-powered advertising tools. The company also issued stronger-than-expected guidance for the next quarter.

Despite the strong financial performance, investors focused on a growing concern: AI is reducing traffic from search engines. Reddit said changes in search behavior and Google's AI-powered search features have made referral traffic more volatile, particularly in the U.S., where user growth slowed. U.S. daily active users increased just 6%, while international users grew a much faster 28%.

The irony is that AI is both helping and hurting Reddit.

On one hand, the company is using AI to improve advertising, generate marketing content, and better target ads. On the other, AI search assistants increasingly summarize Reddit discussions directly in search results, meaning users can get answers without ever visiting Reddit itself.

CEO Steve Huffman argued that Reddit's real value lies in authentic human conversations that AI summaries cannot fully replace. At the same time, Reddit continues to monetize its content through licensing agreements with major AI companies, turning its vast archive of discussions into valuable training data.

Why It Matters

Reddit is becoming one of the first major internet platforms to show both sides of the AI revolution. AI is creating new revenue opportunities while simultaneously reducing the traffic that has powered the web for decades.

The Upside

• Revenue jumped 61%, well above expectations.
• AI-powered advertising continues to attract more advertisers.
• Content licensing deals with AI companies create an additional long-term revenue stream.

The Downside

• AI-generated search results may reduce visits to Reddit.
• Slowing U.S. user growth raises concerns about future engagement.
• Investors remain cautious about the long-term impact of AI on search-driven traffic.

Bottom Line:
Reddit's earnings prove its business is thriving today—but the rise of AI search is reshaping how users reach online communities. The next challenge isn't growing revenue; it's ensuring people still visit Reddit instead of simply reading AI-generated summaries of Reddit conversations.