Key Highlights
- RDDT shares declined 9% following reports the platform may terminate Google’s AI training content access
- The social media company and Google currently maintain a $60 million annual licensing agreement set to expire
- Advertising revenue surged 74% compared to the same quarter last year, representing 94% of overall revenue
- Analysts maintain an average price target of $226.29, suggesting approximately 34% potential gains
- Shares have declined roughly 27% year-to-date in 2026
Shares of Reddit tumbled 9% during Wednesday’s trading session following a Wall Street Journal report indicating the company has held internal conversations about blocking Google’s access to its platform data for artificial intelligence model training.
The social media platform and Google established a $60 million annual licensing agreement in 2024, granting the search giant permission to utilize Reddit’s user-generated content for training its AI systems. With this contract approaching expiration, both companies have entered renewal negotiations.
The core issue? Google’s AI-enhanced search features are diverting traffic away from external websites, prompting Reddit executives to reassess the partnership’s strategic value.
Reddit isn’t alone in experiencing these traffic challenges. Data from Semrush reveals USA Today’s organic Google search traffic from American audiences plummeted nearly 50% during the twelve-month period ending June 2026. Politico experienced a 23% decline, CNN saw approximately 25% reduction, and Business Insider suffered losses exceeding 85%.
“This is existential for some categories of publishers,” stated David Buttle, CEO of media consulting firm DJB Strategies.
Google defended its position, asserting that its AI-powered search features drive traffic throughout the internet ecosystem and contribute to publisher audience expansion.
The platform also maintains a separate data licensing partnership with OpenAI. CEO Steve Huffman discussed both agreements during a recent quarterly earnings conference call, characterizing them as “very meaningful” and emphasizing the mutually beneficial nature of these relationships.
Advertising Revenue Momentum Continues
Despite concerns surrounding the Google partnership, Reddit’s advertising business remains robust. First quarter advertising revenue climbed 74% year-over-year and comprised 94% of total revenue. Total Q1 revenue reached $663 million, marking a 69% increase compared to the prior year period.
Reddit Max, the company’s AI-driven advertising campaign platform, is contributing significantly to this expansion. Businesses leveraging the tool reported an average 17% reduction in cost per action alongside a 25% increase in conversions. Adjusted EBITDA margin grew from 29.4% to 40.1% on a year-over-year basis.
Data licensing revenue, encompassing both the Google and OpenAI agreements, generated $39 million during Q1. Second quarter projections indicate revenue growth of approximately 44%.
Stock Valuation and Analyst Perspectives
Reddit shares are currently trading near $168.78, translating to approximately 10x expected 2026 sales and roughly 34x forward earnings. This represents a premium compared to Meta at 19x and AppLovin at 25x, although Reddit’s accelerated growth trajectory provides justification for the elevated multiple.
Several analysts have identified the $140–$150 price range as a more attractive entry point, which would compress the forward earnings multiple to 28x–30x.
The consensus Wall Street price target stands at $226.29, derived from 13 Buy recommendations and eight Hold ratings — indicating potential upside of approximately 34% from current trading levels.
The company is set to announce Q2 financial results on July 30. The stock has declined approximately 27% since January 2026.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
