Reddit Stock Plunges After Strong Earnings Report

Shares of Reddit Inc (NYSE:RDDT) are experiencing a significant decline, with the stock currently trading at $137.27 after falling by 22.9% today. This drop marks one of the worst single-session declines for the company since March 2025.

The social media platform’s adjusted second-quarter earnings came in higher than expected, at $1.25 on revenue of $805 million. However, concerns about Reddit’s reliance on Google’s AI adoption have triggered a selloff among analysts and options traders.

Reddit’s user growth has slowed down in the US, while search referrals are experiencing choppy trends. These factors have contributed to the decline in stock value, with some experts warning of potential risks associated with the company’s dependence on Google’s ever-changing AI policies.

The Contrarian Edge noted that Reddit’s earnings report was an ‘underrated AI-adjacent’ event, highlighting concerns about the company’s reliance on Google for its content. This has led to a significant increase in options trading activity, with over 90,000 contracts changing hands within the first half hour of trading.

Analysts are weighing in on Reddit’s stock performance, with seven brokerages trimming their price targets. Wells Fargo reduced its target from $187 to $143, while B. Riley and Truist increased theirs to $270 and $275, respectively. The 12-month consensus price target remains at $231.36, representing a significant premium of over 54% compared to the current stock value.

The options market is pricing in a substantial post-earnings move, with some traders loading up on calls. Notably, the weekly 8/7 185-strike call has seen notable buy-to-open activity, indicating potential bullish sentiment among investors.