{"slug": "reddit-s-stock-sinks-after-earnings-as-google-s-ai-overviews-eat-its-traffic", "title": "Reddit's Stock Sinks After Earnings as Google's AI Overviews Eat Its Traffic", "summary": "Reddit's stock fell as much as 23% on July 31 after the company reported second-quarter 2026 earnings that beat estimates, with revenue up 61% to $804.9 million, but CEO Steve Huffman warned that search referrals were 'choppy' and 'more volatile' due to Google's AI Overviews. Huffman said AI Overviews have not made a positive impact comparable to the '10 blue links,' and Reddit is reconsidering its $60 million annual licensing deal with Google, which could put roughly $500 million of AI licensing revenue at risk, according to Wells Fargo.", "body_md": "*Reddit's revenue grew 61% last quarter and beat every Wall Street estimate. Investors sold the stock anyway, because Google's AI Overviews are quietly cutting off the traffic that built Reddit in the first place.*\n\nReddit reported second-quarter 2026 earnings on July 30, posting revenue of $804.9 million, up 61% year over year and well past the roughly $730 million analysts had expected. Adjusted EBITDA more than doubled to $343 million, and daily active users climbed 18% to 130.3 million. Shares fell anyway. They slid as much as 23% the next day, according to CNBC: the stock's worst single-day drop since its 2024 IPO.\n\nThe culprit wasn't the numbers. It was six words in Reddit CEO Steve Huffman's shareholder letter: search referrals were \"choppy\" during the quarter, and traffic got \"more volatile\" as the months went on. On the earnings call, Huffman drew the comparison that spooked investors directly: \"The 10 blue links have driven a tremendous amount of value for the whole ecosystem. AI Overviews has yet to make a similar level of positive impact, and that seems consistent across the broader landscape.\"\n\nThat's Reddit's own CEO, on the record, telling Wall Street that the product Google has spent two years pushing into nearly every search result isn't sending people anywhere. Not to Reddit. Not, in his telling, to much of anyone.\n\n## The Google Problem\n\nThis wasn't the first warning sign. On July 22, the Wall Street Journal reported that Reddit executives were reconsidering the $60 million a year licensing deal that lets Google train its AI models on Reddit's posts and comments. That report alone knocked 9% off the stock. Wells Fargo has since estimated that walking away from the arrangement could put roughly $500 million of AI licensing revenue at risk, according to a note cited by TipRanks. Reddit isn't alone in weighing this. Reuters, USA Today, Politico, People and The Economist are all reportedly rethinking how much of their content they hand Google for free.\n\nThe math explains the tension. Google both sends Reddit its single largest source of outside visitors and builds the AI summaries now competing with that traffic for space on the same results page. Reddit gets paid to feed the machine that may be starving its own front door.\n\nHuffman isn't pretending Reddit can fix this by asking Google nicely. He told investors the company has \"low\" visibility into referral traffic going forward and is responding by building around it rather than waiting on it: \"We're not building for drive-by traffic. We're building a daily destination.\" That's a bet that Reddit's own app and its logged-in users can replace whatever search stops sending. It's also, whether Huffman frames it this way or not, an admission that the old deal - where Google indexes your content and hands back readers - is breaking down for a company that depends on it as much as any publisher does.\n\nThere's a second Reddit-specific problem sitting underneath the AI story. U.S. user growth has gone flat, with 85% of net user additions in the quarter coming from overseas markets, where ad rates run thinner. Stack that against a Google relationship turning adversarial, and you get a stock that fell even as the underlying business grew 61%.\n\n## What It Means for the Open Web\n\nFrankly, the market's reaction here matters more than Reddit's individual numbers. Alphabet's own stock rose roughly 5% to 6% over the same stretch, a divergence 24/7 Wall St. flagged as one of the sharpest recent splits between a platform and the search giant that feeds it. That's the split. That's the trade investors are now pricing across the open web: every site built on Google sending readers has to explain, quarter by quarter, whether that pipe still works. Reddit just became the company with the earnings call transcript to prove it doesn't, not the way it used to.\n\nPublishers have talked about \"Google zero click\" for years. It was always an abstraction, a slow bleed nobody could quite put a number on. Reddit put a number on it. A 23% one-day stock drop, on a quarter it otherwise won by every metric that used to matter.\n\n**Also read:** [Applied Materials jumped 15% on July 30 without saying a word](https://startupfortune.com/applied-materials-jumped-15-on-july-30-without-saying-a-word/) • [The OCC rejected Wise's US bank charter over money-laundering failures and the stock fell 10%](https://startupfortune.com/the-occ-rejected-wises-us-bank-charter-over-money-laundering-failures-and-the-stock-fell-10/) • [SK Hynix chairman Chey Tae-won bought stock just under the disclosure radar to stop a panic](https://startupfortune.com/sk-hynix-chairman-chey-tae-won-bought-stock-just-under-the-disclosure-radar-to-stop-a-panic/)", "url": "https://wpnews.pro/news/reddit-s-stock-sinks-after-earnings-as-google-s-ai-overviews-eat-its-traffic", "canonical_source": "https://startupfortune.com/reddits-stock-sinks-after-earnings-as-googles-ai-overviews-eat-its-traffic/", "published_at": "2026-08-01 01:21:47+00:00", "updated_at": "2026-08-01 01:23:54.897973+00:00", "lang": "en", "topics": ["artificial-intelligence", "ai-products", "ai-policy"], "entities": ["Reddit", "Google", "Steve Huffman", "Alphabet", "Wells Fargo", "Wall Street Journal", "CNBC", "TipRanks"], "alternates": {"html": "https://wpnews.pro/news/reddit-s-stock-sinks-after-earnings-as-google-s-ai-overviews-eat-its-traffic", "markdown": "https://wpnews.pro/news/reddit-s-stock-sinks-after-earnings-as-google-s-ai-overviews-eat-its-traffic.md", "text": "https://wpnews.pro/news/reddit-s-stock-sinks-after-earnings-as-google-s-ai-overviews-eat-its-traffic.txt", "jsonld": "https://wpnews.pro/news/reddit-s-stock-sinks-after-earnings-as-google-s-ai-overviews-eat-its-traffic.jsonld"}}