Reddit's second-quarter revenue jumped 61% and topped Wall Street estimates, with earnings and guidance also beating expectations. Shares still sank 11% in after-hours trading after the company flagged choppy search referral traffic tied to its reliance on Google.
Reddit's second-quarter revenue jumped 61% year-over-year to $805 million, sailing past the $730 million analysts had expected. Shares still sank 11% in after-hours trading once the company flagged trouble with its search traffic.
Results beat across the board
Reddit posted earnings of $1.25 a share, versus the 95 cents expected, while net income climbed to $253 million from $89 million a year earlier. Revenue rose more than 60% for an eighth straight quarter, a run the company tied to overseas expansion, new users and improvements to its ad engine.
The company's guidance also topped Wall Street's targets. Reddit expects third-quarter revenue between $860 million and $870 million, above analyst forecasts of $828 million, and adjusted earnings between $385 million and $395 million against projections of $368 million.
Google reliance weighs on shares
But the beat wasn't enough to hold the stock up. CEO Steve Huffman wrote in an investor letter that "search referrals were choppy in the quarter", reviving investor worry about Reddit's dependence on Google to bring in new users.
That worry isn't new. Earlier in July, Reddit shares tumbled after a report that the company was weighing whether to cut off Google's access to its data, as Reddit and other publishers said they were losing referral traffic to Google's AI-driven search features. Huffman said Thursday that Reddit has not yet found an arrangement it considers a win-win on AI overviews and is still weighing its options.
User growth and monetization
Reddit's user base kept expanding even as referral traffic wobbled. Global daily active unique users rose 18% year-over-year to 130.3 million, ahead of the 129.9 million analysts expected, while U.S. daily active unique users climbed 6% to 53.2 million. Average revenue per user came in at $6.18 globally and $11.85 in the U.S.
The company's "other revenue" line, which includes data licensing, grew 24% year-over-year to $43 million. Its two biggest data-licensing partners are OpenAI and Google — the same company whose search traffic is now weighing on the stock.
Source: CNBC
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