Reddit’s stock took a sharp dip of 9% on Wednesday, surprising many given the company's recent growth streak. The drop followed reports that Reddit is considering ending its lucrative content-sharing agreement with Google, a $60 million-per-year contract that allows Google to train its AI models using Reddit’s vast user-generated content.
Content Access Deal Under Review
The existing pact, signed in 2024, is nearing expiration and renewal talks seem tense. Reddit’s leadership is re-evaluating the partnership due to concerns about how Google's AI-generated search results might be diverting visitors away from third-party websites, including Reddit itself. This raises questions about whether continuing to share content for AI training still benefits Reddit’s ecosystem.
This issue isn't isolated. According to Semrush data, organic Google search traffic in the U.S. dropped nearly 50% for some media outlets over the past year. CNN’s traffic slipped around 25%, Politico's by 23%, and Business Insider experienced a staggering 85% decline. Experts warn this shift could be "existential" for many online publishers, as direct exposure through traditional search results diminishes.
Advertising Growth Defies AI Concerns
Amid the uncertainty with Google’s deal, Reddit’s advertising business remains on a strong upward trajectory. First-quarter ad revenues surged 74% year-over-year, accounting for 94% of total revenue, which reached $663 million a 69% increase from the previous year.
Reddit Max, the company’s AI-driven ad platform, is credited with improving campaign efficiency, delivering 17% lower costs per action and 25% more conversions for advertisers on average. This boost helped expand Reddit’s adjusted EBITDA margin from 29.4% to 40.1% year-over-year.
Revenue from data licensing, including deals with Google and OpenAI, contributed $39 million in Q1. The outlook for Q2 forecasts around 44% revenue growth, showing resilience despite potential shifts in partner agreements.
Market Valuation and Analyst Outlook
Currently trading near $169, Reddit's shares sit at roughly 10 times its projected 2026 sales and 34 times forward earnings, presenting a premium compared to peers like Meta and AppLovin. While some analysts suggest a better entry point could be in the $140 to $150 range, Wall Street remains moderately optimistic, with an average price target of $226.29 implying 34% upside potential.
Reddit’s Q2 earnings report, scheduled for July 30, will be a key event to watch. Since January 2026, the stock has fallen about 27%, reflecting market jitters amid the evolving dynamics between content platforms and AI tech giants.
