Reddit shares sink 7% on 'choppy' search referrals even as results blow past estimates

Reddit shares dropped 11% after-hours Thursday despite second-quarter earnings that beat expectations on both revenue and profit, with the company issuing third-quarter guidance above Wall Street forecasts. The sell-off came as management flagged challenges with search referral traffic volatility.

The social media platform delivered top- and bottom-line beats for Q2 and provided a revenue outlook that exceeded analyst estimates. However, investors focused on commentary describing search referrals as "choppy," raising concerns about traffic stability even as the company outperformed on core metrics.

RDDT had rallied sharply in recent months as investors bet on its growing role in AI training data and improved monetization. The post-earnings decline reflects how quickly sentiment can reverse when execution questions emerge, particularly around user acquisition channels that drive advertising revenue.

The guidance beat signals management confidence in the underlying business, but the search traffic warning introduces uncertainty about one of Reddit's key growth vectors at a time when the stock was pricing in continued momentum.