Reddit Stock Collapses 23% as AI Eats Away at User Growth

Reddit Stock Collapses 23% as AI Eats Away at User Growth

Rich Duprey
Sat, August 1, 2026 at 1:36 AM GMT+5:30
4 min read

• RDDT
  -20.99%
• GOOG
  +6.88%

The artificial intelligence boom has rewarded companies that own valuable data, but it is also rewriting the ways in which people discover information online. AI-powered search summaries (or AIO – Artificial Intelligence Overview) are increasingly answering questions before users ever visit the websites that created the content

That has become a growing challenge for publishers, forums, and social media platforms that depend on traffic to build loyal audiences and sell advertising. Reddit (RDDT) was one of the biggest winners after licensing its massive archive of discussions to Alphabet’s (GOOG) (GOOGL) Google. Its second-quarter earnings suggest the relationship may be more complicated than investors first believed

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The market’s reaction said as much. Despite reporting revenue and earnings that exceeded Wall Street expectations and issuing third-quarter guidance roughly in line with consensus estimates, Reddit shares plunged 23% following its earnings release

The Revenue Beat Hid A Slowing Core Business

Reddit’s Q2 revenue climbed 72% year-over-year (YOY) to $500 million while adjusted EBITDA reached $167 million, up from $39 million a year ago. Those are outstanding financial results on the surface

Yet user growth tells a different story. Global daily active unique users (DAUq) increased 18% YOY, a modest improvement from 17% growth in the first quarter. The problem is where that growth is coming from

The slowdown among U.S. users is particularly concerning because they generate far more revenue. Reddit reported average revenue per U.S. user of $11.85, compared with just $2.26 internationally. That means each slowing U.S. user matters roughly five times as much to the business as an international visitor

Surprisingly, the weakest number may be logged-in users. Growth held at just 1% for the second straight quarter, down from 12% one year ago

AI May Be Keeping Users Off Reddit

On paper, logged-out users look like a bright spot after growing 27%. In reality, they’re much less valuable. Logged-in users create posts, comment, subscribe to communities, and develop habits that advertisers value. Logged-out visitors often arrive through search, consume a single page, and leave