Reddit reported slower U.S. user growth in the 2nd quarter, saying fluctuations in search engine referrals affected traffic, even as the company projected stronger-than-expected revenue for the next quarter.
The social media platform said changing search engine traffic patterns impacted user growth in its home market. At the same time, it continues to face growing competition from larger rivals, including Meta, which is expanding its community-focused offerings through Threads and the Forum app for Facebook Groups.
In a letter to shareholders, Steve Huffman, Co-founder and CEO of Reddit, said: “Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter, but the bigger picture is unchanged: the commercial business is strong.”
During the company’s earnings call, Huffman also noted that AI-generated search overviews have not yet delivered the same positive impact as traditional search results.
Reddit’s growth continues to shift toward international markets, where revenue per user remains significantly lower than in the U.S. The company reported an average revenue per user (ARPU) of $11.85 in the U.S., compared with $2.26 internationally.
Daily active unique visitors in the U.S. increased 6% during the 2nd quarter, down from 7% in the previous quarter. Meanwhile, international daily active unique visitors grew 28%.
Jen Wong, COO of Reddit, said changes in search engine algorithms created “SEO headwinds” that “more than offset” the company’s user acquisition efforts during the quarter. She added that ongoing product improvements are helping convert visitors arriving through search engines into regular app users.
For the 3rd quarter, Reddit forecast revenue between $860 million and $870 million, above analysts’ expectations of $829.1 million.
Wong also said the company’s advertiser base grew 70% year over year during the 2nd quarter, with strong momentum among mid-market, small and medium-sized businesses, and international advertisers.
According to the company, AI-powered advertising tools that generate Reddit-specific ad copy, recommend successful campaigns, and enable community-based targeting have helped attract more advertisers. Reddit also expects 3rd-quarter adjusted EBITDA of $385 million to $395 million, above market estimates of $369 million.
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