Reddit (RDDT) reported second-quarter earnings on Thursday that crushed Wall Street expectations, but the stock fell approximately 7% in after-hours trading as investors focused on management's comments about "choppy" search referral traffic from Google .

The Numbers: A Blowout Quarter

Reddit delivered a standout performance for the quarter ended June 30, 2026. The company reported:

• Earnings per share: $1.25, versus the $0.95 consensus estimate

• Revenue: $805 million, exceeding the $730 million Wall Street expected

• Revenue growth: 61% year-over-year

• Net income: $253 million, up from $89 million in the prior-year period 

Daily active unique users (DAUq) grew 18% year-over-year to 130.3 million, slightly ahead of the 129.9 million analysts had projected. The company's average revenue per user (ARPU) came in at $6.18 .

The Concern: 'Choppy' Search Referrals

Despite the earnings beat, investors focused on a cautionary note in CEO Steve Huffman's shareholder letter. Huffman wrote that "search referrals were choppy in the quarter, and traffic was more volatile later in the quarter" .

The concern stems from Reddit's reliance on Google for user acquisition. This comes amid negotiations between the two companies over Google's access to Reddit's content for AI training. Reddit reportedly considered cutting off Google's access to its data as part of renegotiating their $60 million annual deal .

Huffman said Reddit is still evaluating its options, adding that "in AI overviews, we have still yet to find that win-win" .

Outlook: Strong Guidance

Despite the search referral concerns, Reddit's guidance for the third quarter exceeded analyst expectations. The company projected:

• Revenue: $860 million to $870 million, above the $828 million consensus

• Adjusted EBITDA: $385 million to $395 million, topping the $368 million analyst estimate 

Analyst Perspective

Analysts remain bullish on Reddit's long-term prospects. KeyBanc Capital Markets initiated coverage with an Overweight rating and a $225 price target, noting that Reddit's community-driven platform is "complementary to search, social, web, and LLMs" and provides a durable source of traffic . Most analysts covering the stock rate it a Buy .

The average analyst price target is approximately $227, implying about 28% upside from current levels .