Reddit shares dip under buyback level as Google search uncertainty challenges ad growth

NEW YORK, August 5, 2026, 13:09 EDT – Reddit stock fell below the company’s recent buyback price, as investor concerns about threats from Google search impacted optimism over advertising revenue increases.

Reddit NYSE:RDDT was down 3.3% at $154.71 as of 12:54 p.m. EDT Wednesday, with U.S. markets trading. Shares traded 1.8% under Reddit’s average buyback price for the second quarter.

The divide highlights the latest discussion among investors. Reddit’s growth in revenue is picking up pace, yet its core user base still faces risk from modifications in search.

The company used $235 million to purchase 1.5 million shares at an average price of $157.57 per share. As of June 30, $760.4 million was still approved for buybacks, which represents 2.4% of the market capitalization as of Wednesday.

The quarter did not result in an earnings miss. Revenue surpassed the LSEG consensus by 10.2%, and cash generation more than doubled.

Reddit Q2 scorecard	Q2 2026	Year-on-year change	Investor comparison
Revenue	$804.9 million	Up 61%	10.2% higher than consensus
Advertising revenue	$762 million	Rises 64%	94.7% of total income
Adjusted EBITDA	$343 million	Surges 106%	43% margin
Free cash flow	$261 million	Up 135%	32.4% margin

Figures are based on company filings and LSEG projections as cited by Reuters.

Early guidance for the third quarter surpassed estimates. Revenue was forecast at a midpoint of $865 million, exceeding LSEG consensus by 4.3%. EBITDA guidance at the midpoint came in at $390 million, 5.7% above expectations.

The broader issue lies within Reddit’s geographic distribution of users.

Geography	Revenue / growth	Daily users / growth	ARPU / growth
Global	$804.9 million / up 61%	130.3 million / up 18%	$6.18 / up 36%
United States	$638.1 million / up 56%	53.2 million / up 6%	$11.85 / up 51%
International	$166.8 million / up 84%	77.1 million / up 28%	$2.26 / up 31%

Quarterly corporate data as of June 30.

The United States accounted for 79% of total revenue, despite representing just 41% of daily active users. In contrast, international markets made up 59% of users but generated only 21% of revenue.

U.S. ARPU increased by 51%, while daily user numbers rose by 6%. The growth rate for ARPU was 8.5 times higher than the growth rate for audience size.

The leverage remains strong as long as ad prices stay firm. However, it grows unstable if search referrals continue to decline.

CEO Steve Huffman stated that AI Overviews did not deliver “a similar level of positive impact.” According to COO Jen Wong, “SEO headwinds” outweighed user-acquisition efforts in the quarter. Reuters

Advertising accounted for $762 million, making up 94.7% of revenue for the quarter. Reddit reported that ad prices climbed roughly 40% and impressions were up 17%.

While the licensing bull case is significant, it is still based on analyst projections. Alphabet-owned Google NASDAQ:GOOGL reportedly pays Reddit $60 million per year for data access. According to Wells Fargo analyst Alec Brondolo, potential new deals with Google and OpenAI together could total $550 million.

The projection amounts to 17% of an uncomplicated annualized Q2 revenue run rate and is not based on Reddit’s own forecasts. Dan Salmon, an analyst at New Street Research, commented that Reddit continues to offer “lots of value in real human information.” Barron’s

Roblox NYSE:RBLX, also noted by Yahoo Finance, dropped 3.5% to $35.69 on Wednesday. Its approach is distinct. What’s clear is that investors seek sustained user expansion, rather than just revenue outperformance.

Analyst targets highlight the broad range of interpretations investors have for a single quarter.

Date	Brokerage	Recommendation	Target	Implied return from $154.71
July 31	Wells Fargo	Equal Weight	$142	-8.2%
August 3	Roth Capital	Neutral	$145	-6.3%
July 31	JPMorgan	Neutral	$185	+19.6%
July 31	Piper Sandler	Overweight	$195	+26.0%
July 31	Oppenheimer	Outperform	$200	+29.3%
July 31	Wedbush	Outperform	$221	+42.8%

Highlighted post-earnings calls; implied returns are based on Wednesday’s intraday share price.

The target range is between $142 and $221. Neutral-rated firms factor in traffic risk, while those with outperform ratings highlight advertising execution and licensing leverage.

Key risks continue to center on search, pricing, and deal conditions. Referral traffic may decline, U.S. user growth could decelerate, and increases in ad prices may level off. Reddit’s buyback authorization does not require any purchases.

For investors, $157.57 serves as a reference point rather than a confirmed support level.

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Further analysis

Editorial insight

What is keeping Roblox shares weighed down following its earnings report?

For the third quarter, bookings are forecast between $1.576 billion and $1.653 billion, representing a decline of 14%–18%. The midpoint stands roughly 9% lower than LSEG's $1.77 billion projection. Shares slid 27% to $35.59 on July 31, marking their poorest trading session. Most recently, shares traded at $35.57, down 3.9% on the day.

Are increases in user numbers continuing to lead to higher spending?

Daily active users for the second quarter climbed 10% year-on-year to 123 million, but bookings were up just 8% at $1.557 billion. Compared to the first quarter, DAUs dropped 7%. The company attributed this to less effective monetization among younger users in the U.S. and Canada, and warned that this trend will likely continue into the third quarter.

Does cash flow support the present valuation?

Second-quarter free cash flow reached $294 million, a 66% increase compared to the same period last year. Over the past four quarters, free cash flow totaled around $1.64 billion. With a current market capitalization of $25.5 billion, this puts the free cash flow multiple at approximately 15.6 times. However, guidance for the third quarter is between a loss of $60 million and a gain of $5 million, so the trailing multiple does not account for the significant slowdown projected in Q3.

Is Roblox's share repurchase offsetting dilution from employee compensation?

Roblox used approximately $380 million to buy back 8.2 million shares during Q2, with an estimated average price of $46.34 per share. The current share price stands about 23% lower. Fully diluted shares increased 2% from a year earlier, reaching 752 million. Stock-based compensation totaled $282 million, which is similar to Q2 free cash flow. The buyback program is countering dilution, but has not yet led to a decline in diluted shares outstanding.

What is the magnitude of the outstanding safety and legal expenses?

Roblox reported a 54% increase in infrastructure and trust-and-safety costs, reaching $236 million in the second quarter. Additionally, the company logged $34 million in legal settlement charges. Roblox noted the unpredictable nature of these legal issues in terms of size, scope, and timing. The company’s Q3 net loss forecast does not include accruals for potential losses, as their amount is currently unknown.