Reddit stock plunges 23% as AI search eats into user growth

Published Jul 31, 08:06 PM UTC

Reddit's stock plunged 23% following its Q2 2026 earnings release, despite beating revenue and earnings expectations. Revenue surged 72% year-over-year to $500 million, but user growth metrics revealed underlying weakness. Global daily active users grew only 18%, with US user growth slowing to 6% from 16% a year ago. Most concerning, logged-in user growth remained stagnant at 1% for the second consecutive quarter, down from 12% previously. The article attributes the slowdown to AI-powered search summaries, particularly from Reddit's partnership with Google, which answer user questions without driving traffic to Reddit. This reduces opportunities to convert casual visitors into engaged, logged-in users who generate higher advertising revenue. Reddit management plans to stop reporting logged-in versus logged-out user metrics, reducing transparency. The company is reportedly rethinking its Google partnership as the trade-off between licensing revenue and user engagement becomes apparent.