Reddit's US user growth slowed in the second quarter as search engine algorithm changes made traffic less reliable, pushing the stock down roughly 12% in extended trading. Revenue still climbed 61% to $805 million, and the company forecast third-quarter revenue of $860-870 million, beating estimates - but investors zeroed in on the fragility of the high-value US audience.
Management blamed "SEO headwinds" from search algorithm changes that "more than offset" the company's efforts to attract new users. CEO Steve Huffman explained that AI search overviews don't send traffic the way the old list of links did, making discovery less predictable. The result: US daily active unique visitors grew only 6%, down from 7% the prior quarter, even as international visitors jumped 28%.
The US remains Reddit's ad revenue engine. Average revenue per user hit $11.85 in the US, compared to just $2.26 internationally. So a slowdown in US user growth - the most monetizable audience - can outweigh a surge in lower-value international users when it comes to overall ad inventory and pricing power.
Ad business still shows strength
Even with the traffic wobble, Reddit's ad business looked solid. The advertiser count grew 70% year-over-year, and AI-powered ad tools are drawing more mid-market, small and medium-sized, and international advertisers. That momentum helped the company project third-quarter revenue of $860-870 million and adjusted EBITDA of $385-395 million, above analyst expectations.
Why this matters for sales
For sales teams that use Reddit advertising or monitor consumer platforms, the search volatility adds a layer of unpredictability to US campaign performance. The most valuable users - US-based, logged-in - are reaching the platform through fewer predictable paths, which can make audience targeting and cost-per-result harder to forecast. Meanwhile, a 70% rise in advertiser count, fueled by AI tools, suggests that competition for ad space will intensify, potentially driving up costs. Sales leaders should watch how Reddit's ad platform evolves to convert one-off visitors into logged-in users, as that will directly affect the efficiency of ad spend.
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