Reddit CEO Declares ‘People Don’t Want AI Summaries—They Want Reddit’

Lekha Gupta

Sat, August 1, 2026 at 6:00 PM GMT+3 7 min read

RDDT -20.99%

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Reddit, Inc. stock fell nearly 10% in Friday's premarket session after investors focused on management's warning that search referral traffic remained "choppy" amid ongoing uncertainty around Google's AI-driven search changes, overshadowing another quarter of better-than-expected revenue and earnings.

CEO Steve Huffman said search referrals were "choppy" during the second quarter and became more volatile later in the period as Google's AI-powered search continues to evolve.

He said Reddit is prioritizing direct engagement through its app over search-driven traffic, adding that the company is "not building for drive-by traffic" but rather "a daily destination" and that direct app users are significantly more valuable than search referrals.

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Earnings Snapshot

Reddit reported second-quarter earnings of $1.25 per share, beating the analyst consensus estimate of 95 cents, according to Benzinga Pro.

Revenue increased 61% year over year to $804.9 million, topping the Street estimate of $730.3 million. The quarter marked Reddit's eighth consecutive period of revenue growth exceeding 60%.

Management said advertising demand remained strong across sales channels, particularly among large enterprise customers.

Advertising revenue climbed 64% year over year to $762 million, while other revenue increased 24% to $43 million. Active advertisers rose more than 70% from a year earlier, led by strength in the retail and travel categories.

Ads API revenue grew more than 40% sequentially, while more than half of revenue came from credit-line customer relationships.

Revenue from dynamic product ads and app install campaigns more than doubled from a year earlier. Scaled channel revenue from mid-market and small- and medium-sized business advertisers also doubled.

Gross margin expanded 50 basis points year over year to 91.3%, despite higher artificial intelligence and machine learning computing costs. Adjusted EBITDA margin reached 43%, with third-quarter guidance implying a midpoint margin of 45%.

Operating cash flow more than doubled to $262 million, while trailing 12-month operating cash flow surpassed $1 billion for the first time.

Capital expenditures totaled $1 million, or less than 0.2% of revenue.

Reddit ended the quarter with $2.8 billion in cash, cash equivalents and marketable securities.

The company repurchased approximately 1.5 million shares during the quarter for $235 million, leaving about $760 million available under its current share repurchase authorization.

Key Metrics

Daily Active Uniques (DAUq) exceeded 130 million during the quarter, while weekly reach topped 500 million users.

New app user retention improved 50% year over year, reflecting stronger onboarding and engagement. Reddit reiterated its long-term goal of reaching 1 billion global daily users and 100 million daily users in the U.S.

Average revenue per unique user (ARPU) increased 36% year over year to $6.18. U.S. revenue grew 56%, while international revenue jumped 84%.

Video advertising became Reddit's fastest-growing upper-funnel advertising objective, with revenue more than doubling from a year earlier.

Shopping-related conversations increased 40% year over year, supporting the rollout of shopping listing ads in alpha testing.

The company's Shopify integration also became generally available, with more than 500 advertiser accounts integrated.

Outlook And Management Commentary

Reddit expects third-quarter revenue of $860 million to $870 million, above the analyst consensus estimate of $829 million. The guidance implies 47% to 49% year-over-year growth.

The company forecast adjusted EBITDA of $385 million to $395 million, representing 63% to 67% year-over-year growth. Adjusted EBITDA margin is expected to be about 45% at the midpoint.

Reddit also lowered its full-year stock-based compensation outlook to the low-to-mid teens as a percentage of revenue, compared with its previous expectation for the high-teens range. Third-quarter stock-based compensation and related taxes are expected to total $140 million to $155 million.

Huffman said the company remains confident in achieving its long-term milestones, although execution will take time. He added that outcomes for the data licensing business remain broad, with growing demand for Reddit's data across an expanding range of artificial intelligence and other use cases.

Huffman said Reddit is positioned to benefit as artificial intelligence changes how people discover information, arguing that users increasingly value authentic human conversations over AI-generated summaries.

"AI compresses the internet into summaries. Reddit delivers the opposite: deep discussions, passionate debates, and lived experiences," Huffman said.

"People don't want a summary of Reddit, they want Reddit," he added, describing the platform as "the antidote to an automated web" where consumers seek real opinions, firsthand experiences and trusted community discussions.

Image via Shutterstock

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