Reddit RDDT stock: $275 bull vs $143 bear after 21% crash

Reddit (RDDT) just produced the widest post-earnings split on Wall Street this season: within two trading days of the stock’s worst drop since its IPO, Wells Fargo cut its target to $143 — below the market — while Truist raised its own to a Street-high $275, per GuruFocus’ tally of the analyst moves. The same print now supports a -8% bear case and a +78% bull case. Here is the synthesis the crash obscures: the market erased roughly a fifth of Reddit’s value over a 300,000-user dip in US dailies — about half a percent of the base — and the absence of a new AI contract, while the actual income statement beat revenue estimates by $73 million. Friday repriced Reddit’s AI-and-search narrative, not its quarter.

The deeper mispricing, and the take I have not seen priced into either camp’s model, sits in the per-user line. US average revenue per unique hit $11.85 in the quarter, up 51% year-over-year, per Reddit’s Q2 press release — meaning monetisation per American user is compounding at eight times the pace the American user base is growing (6%). The market chose to price the slower line. That is the same mistake the Street made with Meta between 2018 and 2021, when North American daily actives went flat for quarters at a stretch while ARPU roughly doubled and the stock tripled. Reddit’s P&L now runs on depth of monetisation, not breadth of audience; the tape is still trading the top of the funnel.

The quarter the market refused to buy

The numbers were strong everywhere except the one line the market watches most. Second-quarter revenue rose 61% year-over-year to $804.9 million against estimates of $731.8 million, with net income of $253 million, or $1.25 per diluted share, and global daily actives up 18% to 130.3 million, per Yahoo Finance’s earnings coverage. But US daily actives came in at 53.2 million against 54 million expected — down from 53.5 million in the first quarter — and the July 31 session took the stock down almost 21% to $140.67, the largest decline since listing. By Monday’s close RDDT had clawed back to $154.71, per Nasdaq and Yahoo Finance data, with the premarket ticking higher on August 4.

Underneath the headline, the quarter was arguably the cleanest Reddit has printed as a public company. Advertising revenue reached $762 million, up 64%, on gains in both pricing and impressions; adjusted EBITDA more than doubled to $343 million; gross margin held at 91.3%; and free cash flow hit $261 million, up 135% year-over-year, per the company’s July 30 release. Weekly active uniques — the metric management keeps urging the Street to adopt — grew 24% to 514.6 million. International was the growth engine: 77.1 million daily actives, up 28%, and international revenue of $167 million, up 84%, albeit off that $2.26 ARPU base.

Nor did management guide down. The company set third-quarter guidance at $860–870 million in revenue and $385–395 million in adjusted EBITDA — sequential growth of roughly 7% at the midpoint on top of the quarter it just beat by $73 million. A company losing its audience to AI answer engines does not typically raise its profit bar by a hundred million dollars sequentially. “In an increasingly automated web, the value of real human perspective has never been higher,” CEO Steve Huffman said in the earnings release — which is either the thesis or the epitaph, and the entire $132 spread between Wells Fargo and Truist is a disagreement about which.

The Street’s response: a genuine two-way market

Seven brokerages trimmed targets, led by Wells Fargo’s cut to $143 from $187; B. Riley went the other way to $270 and Truist to $275. That disagreement is the story for positioning: the bear number sits almost exactly on the crash low — $140.67 — meaning Wells Fargo’s downside case is, literally, the price the panic already printed. As FinanceFeeds noted in its same-day coverage, Reddit grew revenue 61% and sold off anyway — and Google is why.

The bulls are anchoring on the ad machine rather than the user counter. B. Riley, reiterating its Buy case, argued that Reddit’s investments in its ad stack are producing above-average returns on ad spend in key categories, per Investing.com’s coverage of the note. Citizens, which carries a $240 target and a Market Outperform rating, flagged a 129% year-over-year jump in app-install ad volume and said Reddit’s new app campaigns cut advertiser acquisition costs by 15% while lifting result volume 28%, per Investing.com. Those are performance-advertising numbers of the kind that preceded Meta’s own re-rating cycles — and they are entirely invisible in a debate conducted in daily-active-user increments.

Management, for its part, refused to feed the AI-deal countdown clock. “These deals aren’t binary. They have to make sense for Reddit, but there are many ways, I think, for the value to return to Reddit,” Chief Executive Officer Steve Huffman told analysts on the call. On the Google overhang he was unusually direct: “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter… Our visibility on search continues to remain low, and we expect it to probably continue to be volatile.” That candour cuts both ways — it validates the bear’s core fear while confirming the ad business grew 61% straight through it.

Market impact: what the reset actually repriced

The crash did not happen in isolation; it completed a de-rating that has been running since spring. Reddit peaked at $282.95 on March 27, 2026, and the post-earnings low marked a maximum drawdown of 55% from that top, per TIKR’s August analysis — a peak-to-trough loss deeper than anything Meta suffered in its 2022 Apple-privacy winter, inflicted on a company growing revenue 61%. The stock is down roughly 40% year-to-date; market capitalisation stood near $27 billion as of August 3, per Capital.com data, versus about $31 billion at the pre-earnings close. For a company that priced its March 2024 IPO at $34, the full round trip — $34 to $282.95 to $140.67 — has now compressed into 28 months, with the 52-week range at $119.27–$282.95 per Nasdaq.

The multiple tells the sharper story. On TIKR’s numbers, Reddit now trades at 7.27x forward EV/Revenue against Meta’s 5.91x — and below Alphabet’s 9.20x. As recently as September 2025, Reddit’s premium over Meta was 17 turns of revenue; it is now barely more than one. The market has, in ten months, gone from pricing Reddit as a generational data asset to pricing it as a slightly-faster Meta with a Google dependency. Both cannot be right.

Source: TIKR, August 2026. Reddit printed 61% revenue growth and a 91.3% gross margin in Q2 2026, per company filings — the multiple compression happened while growth held.

For context on how violently the market is repricing AI-adjacent names in both directions, this is the same tape that just forced Meta into earnings under AI-spending pressure and has AMD walking into tonight’s print with a 12% swing priced. Reddit’s specific problem is concentration: its growth story runs through Google’s referral pipes and a handful of AI licensing counterparties, so a 0.6% US user wobble carries index-level consequences for the multiple.

The data-rights fight running underneath the licensing line

The “no new AI deals” complaint deserves scrutiny, because the existing economics are smaller than the narrative suggests. Reddit’s foundational contracts are the roughly $60-million-a-year agreement Google signed in February 2024, per CBS News, and the OpenAI partnership struck three months later, which analysts estimated at around $70 million a year, per Search Engine Land. Reddit itself disclosed $203 million in aggregate data-licensing contract value ahead of its IPO, per TechCrunch. Set against that, the entire “other revenue” line — where licensing lives — was $43 million this quarter, growing 24% while advertising grew 64%. Licensing is roughly 5% of revenue. The market sold off a $762-million-a-quarter ad business because a 5% side business didn’t announce a sequel.

What that side business does carry is the renewal calendar. The Google agreement is approaching expiry, and Reddit has openly weighed whether to walk away as Google’s AI Overviews increasingly answer queries with Reddit content without sending the click, per Quartz’s July coverage. The traffic math behind that leverage is public: Pew Research Center found users click a result link only 8% of the time when an AI summary appears, versus 15% without one, and click the sources cited inside AI summaries just 1% of the time, per Search Engine Land’s report on the study. That is the mechanism converting Reddit’s Google dependency from a distribution channel into a negotiation.

Reddit is simultaneously prosecuting the uncompensated side of the same trade. It sued Anthropic in June 2025 over alleged scraping of Reddit data for model training, and in October 2025 filed against Perplexity alongside scraping firms SerpApi, Oxylabs and AWM Proxy in Manhattan federal court, per CNBC — and a federal judge has since allowed Reddit’s DMCA anti-circumvention claims to proceed. The strategy is coherent: license the front door, litigate the back door, and establish that human conversation is priced inventory. Reddit’s own complaint put it more vividly than any analyst note: “In a very real sense, these Defendants are similar to would-be bank robbers, who, knowing they cannot get into the bank vault, break into the armored truck carrying the cash instead,” the company wrote in the Perplexity filing, per Built In’s review of the case.

What happens next: three measurable tests

What settles the bull-bear argument from here is measurable. First, watch whether US dailies stabilise above 53 million in the third quarter. The 53.2 million print was still up 6% year-over-year; a second sequential decline would convert a wobble into a trend and hand Wells Fargo the argument. Given weekly actives grew 24%, the likelier outcome is a flat-to-modestly-higher Q3 number as logged-out Google traffic churns while logged-in usage deepens — which is what the ARPU line has been saying all year.

Second, the Google renewal is the real clock, whatever the framing from the call. Huffman’s “not binary” language — “These deals aren’t binary. They have to make sense for Reddit” — signals renewals and expansions rather than headline deals, but the negotiation now happens with Pew’s 8%-versus-15% click data and two active federal lawsuits sitting on the table. A renewal materially above the original $60 million a year would reprice the entire licensing narrative overnight; a lapse would force the market to test whether Reddit’s ad business really can grow through a colder Google. Either outcome resolves the overhang that cost the stock a fifth of its value.

Third, $140.67 is now the line the chart trades against. The asymmetry is unusual: the bear case has already traded — Wells Fargo’s $143 target sits on the crash low — while the bull case requires only that the 61% growth engine keeps outrunning a search channel management itself calls volatile. Guidance of $860–870 million for Q3, against the $804.9 million just printed, says management expects exactly that. Between $143 and $275, the Street has stopped pretending it knows which Reddit this is.

FAQ: Reddit RDDT stock after the crash

Why did Reddit stock crash after beating earnings?
Two reasons, neither on the income statement: US daily active uniques came in at 53.2 million versus 54 million expected — down 300,000 from Q1 — and no new AI licensing deal was announced. Revenue beat by $73 million and EPS nearly tripled, but the July 31 session still cut the stock 20.9% to $140.67, its worst day since the March 2024 IPO.

What are analyst price targets for RDDT now?
The spread is the widest of the season: Wells Fargo cut to $143 from $187 and seven firms trimmed targets, while B. Riley raised to $270 and Truist to a Street-high $275. TIKR puts the 31-analyst mean near $225, implying roughly 45% upside from the $154.71 August 3 close.

How much does Reddit actually make from AI licensing?
Less than the narrative implies. The Google deal was reported at about $60 million a year and the OpenAI deal at roughly $70 million; total “other revenue,” which houses licensing, was $43 million in Q2 2026 — about 5% of the $804.9 million total. Advertising, at $762 million and growing 64%, remains the business.

Is Reddit stock cheap after the 21% drop?
Cheaper than it has ever been relative to peers: 7.27x forward EV/Revenue versus Meta’s 5.91x and Alphabet’s 9.20x, per TIKR — down from a 17-turn premium over Meta in September 2025 — while growing revenue 61% with a 91.3% gross margin. Whether that is cheap depends on the Google search-referral risk staying contained.

What should investors watch next for Reddit stock?
Three things: whether US dailies hold above 53 million in Q3, the outcome of the expiring Google licensing agreement — renewal, repricing, or walk-away — and whether the $140.67 crash low holds as support. Q3 guidance of $860–870 million in revenue is the bar management set for itself.