Reddit suffers record stock rout on dearth of new AI deals
Reddit is already exploring a new potential deal with Google.
On July 31, Reddit shares plummeted 21% to close at US$140.67, marking the company's worst-ever decline after failing to announce any new data licensing agreements in its latest earnings report. Investors had anticipated a shift in revenue towards data deals for AI training, as Reddit's ad business, its primary income source, became less appealing.
The platform's extensive repository of user posts has attracted marketers and AI firms, with Reddit already securing licensing deals worth hundreds of millions of dollars with OpenAI and Alphabet's Google. However, no new arrangements were disclosed in July, disappointing investors. Reddit's chief operating officer, Jen Wong, stated that the company's leadership is actively exploring new potential deals with Google and is "thinking very consistently about" the expanding marketplace of data licensing opportunities.
CEO Steve Huffman acknowledged the data licensing sector as a growing one, beyond Google and OpenAI. Despite a revenue forecast that surpassed Wall Street estimates, Reddit's stock performance overshadowed this positive news. The current quarter's revenue is projected to be US$860 million to US$870 million, up from the average analyst estimate of US$829.4 million.
Second-quarter sales exceeded expectations, surging 61% to US$805 million, driven primarily by advertising. Reddit's user base stood at 130 million daily active users, consistent with Wall Street estimates. Huffman emphasized that increasing this user base is the company's top priority. Analysts expressed concerns about Reddit's ability to sustain growth in its US-based community, particularly amid volatile conditions around Google search traffic.
Wong highlighted that many search landscape changes remain "invisible" to the company, with a focus on expanding users who directly access Reddit. International revenue, representing over 20% of total business, grew by 84% from the previous year, signaling success in broadening advertising partnerships. Reddit has seen a 70% increase in advertisers since 2025, driven by mid-sized marketers, and generated US$1 billion in free cash flow for the first time in a 12-month period.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
