Reddit (RDDT): A Buy Ahead Of Earnings, Or Is The Selloff Justified?

Reddit reports second-quarter net connected July 30. Heading into the print, the banal is down astir 27% twelvemonth to date, and astir of that harm came from 1 story. The Wall Street Journal precocious reported that Reddit had internally discussed restricting Google's entree to its level contented for AI training, arsenic renewal talks implicit their data-licensing woody deed friction. The banal dropped astir 9% that day.

Reddit and Google signed a $60 million-a-year licensing statement successful 2024, letting Google bid its AI models connected Reddit's content. That's nether 2% of Reddit's trailing revenue.

But investors reacted arsenic if the fig mattered little than the signal. If Reddit is consenting to locomotion distant from a unrecorded AI licensing partner, that raises questions astir however durable the remainder of Reddit's information concern truly is, and whether Google's AI-powered hunt results are already cutting into the referral postulation Reddit depends on. Let's interruption down the case.

The Growth Story Hasn't Slowed

Reddit hasn't missed an expert estimation since going nationalist successful 2024. Revenue maturation has really sped up: 61% year-over-year successful the archetypal 4th of 2025, past 69% successful the astir caller quarter. Diluted EPS roseate 7x during this period. Free currency travel roseate 145% year-over-year successful the archetypal quarter.

Reddit's gross borderline sits astatine 91%, up 100 ground points year-over-year, and nett income borderline runs astatine 29%,  some acold supra emblematic societal media peers.

Despite this growth, an investigation of abbreviated sellers' enactment and hedge money sentiment is signaling beardown negativity for the banal up of earnings. Read much connected that here.

Users Keep Growing

Weekly progressive users grew 23% YoY to astir 493 million. Daily progressive users extracurricular the US grew adjacent faster, up 26% to 73.3 million, present 58% of Reddit's astir 127 cardinal full regular progressive users. Advertising gross roseate 74% year-over-year to $625 million, and Reddit keeps expanding contented translation into 30 languages to turn that planetary basal further.

Valuation and Growth Rate

Reddit trades astatine 24x guardant earnings, an 84% premium to the 13x assemblage median. That premium looks smaller erstwhile you origin successful growth: gross is up 71% implicit the past 12 months against a 3% adjacent average, and diluted EPS is up much than 430% against a 7% adjacent average. On a PEG basis, Reddit trades astatine 0.55 versus a 1.26 adjacent average, a 57% discount. Wall Street's mean terms people sits astir $221-$227, implying 30%+ upside from existent levels.

The Google Question Is The Real Risk

If Google's AI hunt summaries support cutting into clicks Reddit gets from search, that pressures the advertizing concern too, not conscionable licensing. CEO Steve Huffman has argued Google needs Reddit's information much than Reddit needs immoderate azygous AI partner, and a renegotiated, usage-based woody could rise Reddit's gross alternatively of cutting it. Until a woody is announced, that stays a genuine unknown, not a settled bullish argument.