Reddit (RDDT -20.99%) delivered the kind of second quarter growth investors usually celebrate. Revenue rose 61% year over year to $805 million, the company’s eighth consecutive quarter of growth above 60%.
Net income of $253 million nearly tripled from $89 million a year ago, reaching 31% of revenue. And management guided for third-quarter revenue of $860 million to $870 million, more growth than most companies can dream of.
The stock fell 21% Friday anyway, closing at about $141.
The trouble was in the user table. Reddit’s U.S. daily active uniques (the company’s count of unique daily visitors) slipped to 53.2 million in the second quarter from 53.5 million in the first quarter. Nearly everything else in the report grew. That number went backward. To me, it explains the whole reaction.
Image source: Getty Images.
The quarter American users paid for
To be fair, the report was full of strength. The social media company‘s global daily active uniques rose 18% year over year to 130.3 million, and weekly uniques crossed half a billion for the first time. Free cash flow of $261 million more than doubled. And advertising revenue, the heart of the business, grew 64% year over year to $762 million.
However, revenue growth is decelerating gently. The 61% rate follows 69% growth in the first quarter — though those are heights most companies never see once.
The company even spent $235 million during the quarter buying back 1.5 million of its own shares, at an average price of $157.57 — well above where the stock trades now.
But the geography of the money explains the sell-off. U.S. revenue grew 56% year over year to $638 million, about 79% of the company’s total. That revenue is generated by the 53.2 million U.S. daily uniques, roughly 41% of the global audience. International revenue, meanwhile, grew 84% year over year to $167 million, on an international audience that expanded 28%.
Reddit’s average revenue per unique in the U.S. was $11.85 in the quarter, more than five times the $2.26 it earned internationally. An American user is simply worth far more to Reddit than any other kind. And America is where the audience stopped growing.
Worth noting, too: Growth in the quarter leaned heavily on pricing. That U.S. average revenue per unique rose 51% year over year, while the U.S. audience grew 6%. Advertising can run on price increases for a while. But if the audience stalls from here, revenue growth leans almost entirely on charging advertisers more per user.
What went backward, exactly
The sequential dip is small, and it deserves honest framing. U.S. daily uniques are still up 6% year over year.
The 53.2 million figure is the first quarter-over-quarter decline in the five quarters Reddit charts in its shareholder letter, after climbing steadily from 50.3 million in the second quarter of 2025. One wobble is not a collapse.
The concern is where the wobble came from. “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter,” CEO Steve Huffman wrote in his letter to shareholders, adding that the company’s “visibility in referral traffic remains low.”
The social media company depends on search engines to deliver a large share of its visitors, and that dependence shows in the mix. Logged-out U.S. daily uniques (the visitors who typically arrive from a search result) grew 10% year over year. Logged-in U.S. users (the committed core that signs in) grew just 1%, to 23.1 million.
Huffman wrote that Reddit is “not building for drive-by traffic,” and the company’s product work is aimed at helping casual visitors form daily habits. That work matters precisely because the search side sits outside the company’s control.
Today’s Change
(-20.99%) $-37.37
Current Price
$140.67
Key Data Points
Market Cap
$27BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.
Day’s Range
$135.22 – $151.38
52wk Range
$119.27 – $282.95
Volume
29.9M
Avg Vol
5.4M
Gross Margin
91.00%
Ultimately, is the sell-off an overreaction? After the drop, the stock trades at about 33 times earnings, which is arguably inexpensive for a company compounding revenue at 61% with a 31% net margin.
If U.S. dailies resume growing next quarter, this growth stock could look like a bargain in hindsight.
But I’d rather see that quarter first. The premium ad business runs on an American audience that just flattened, and management says its own visibility into the traffic is low. One more sequential decline would likely start to look like a trend.
The business remains impressive. Until the U.S. user number turns back up, though, I’ll watch from the sidelines.