Reddit Stock Soars on Q2 Earnings, What’s Driving the Fastest Growth in Three Years?

Reddit (RDDT) stunned Wall Street Thursday evening as it posted its fastest quarterly revenue growth in over three years and sent its stock up more than 17% in after hours trading. The company reported second quarter revenue of $500 million, sharply beating analysts’ expectations of $425 million tracked by Bloomberg. Adjusted earnings per share (EPS) also outperformed forecasts, coming in at $0.92 compared to the projected $0.72.

The sharp revenue jump marks a 78% year over year surge for the social media firm and confirmed the momentum first hinted at during Reddit’s AI rollout and advertising upgrades earlier this year. 

User Growth and Google Algorithm Headwinds

Reddit’s global daily active users (DAUs) hit 110.4 million in Q2, just above expectations. In the U.S., however, DAUs slightly missed estimates, coming in at 50.3 million versus the 50.5 million consensus.

CEO Steve Huffman addressed the shortfall during the earnings call, attributing the volatility in U.S. traffic to fluctuations in Google Search traffic, which has long served as a key funnel for Reddit’s forums. “Traffic from Google varies week to week but overall it was a headwind in Q2,” Huffman told analysts. Still, he noted that engagement improved as the quarter progressed, showing signs of stabilization.

This traffic tension with Google is not new. Reddit’s traffic has been in flux ever since changes to Google’s algorithm earlier this year altered the way forums and discussion boards are indexed. Despite that, Reddit’s user stickiness especially among niche communities continues to be a core strength for the platform.

Reddit Answers The Rise of AI Utility

Reddit also highlighted the growing interest of its AI-powered search tool, Reddit Answers, which was launched back in December 2024. By the end of Q2 2025, Reddit Answers boasted 6 million weekly active users which is a massive jump from 1 million in the prior period.

In Q2, “other revenue,” which includes licensing deals, jumped 24% year over year to reach $35 million. Deals with OpenAI and Google, each valued at $60 million, form the backbone of this segment.

Forecast Beats Fuel Bullish Sentiment

Reddit expects its Q3 revenue to come in between $535 million and $545 million well ahead of Wall Street’s $473 million forecast. Adjusted EBITDA is projected to hit between $185 million and $195 million. The forward guidance shows growing confidence in Reddit’s ad products, user monetization strategies, and data sales model.

This bullish forecast helped power Thursday’s after hours stock surge and sparked broader investor interest, as highlighted in TradingView’s Q2 coverage. 

Investors appear more receptive this quarter than in February or May, when Reddit shares sank despite earnings beats due to lower than expected U.S. user figures. Now, the narrative has shifted, supported by stronger top line growth and a more optimistic outlook.

Market Recovery and Investor Confidence

Reddit shares have rebounded approximately 110% from April lows of $87, driven in part by strong Q2 performance and AI product announcements. Still, they remain well below February’s highs of over $220 a reminder that the investor confidence is being rebuilt step by step.

This triple-threat approach, ads, AI, and licensing was emphasized throughout the Q2 earnings call transcript, where Reddit executives doubled down on product innovation and data monetization. Huffman described the AI and licensing businesses as “early innings” with massive long-term upside, particularly as regulatory clarity around AI training datasets continues to evolve.

For 2025, the stock is down about 2%, but the tide may be turning. With a strong earnings beat, renewed growth in DAUs, and improving engagement from AI integrations, Reddit appears to be turning prior skepticism into optimism.

As the Q3 guidance indicates continued momentum, investors are likely to pay attention to two things: the DAU growth, particularly in the U.S. and the progress in the AI data licensing segment. As long as Reddit can keep delivering on the rest of the above metrics and continue to generate solid ad revenue, it might become one of the more unexpected tech turnaround stories of 2025.