Reddit (RDDT) Stock Plunges 9% Amid Concerns Over Google AI Partnership Renewal

Key Takeaways

Table of Contents

RDDT shares declined 9% following reports the platform may discontinue Google’s AI training access to its content
The social media company’s $60M annual agreement with Google is approaching expiration amid renewal negotiations
Advertising income surged 74% compared to the prior year in Q1, representing 94% of overall revenue
Analyst consensus establishes a price target of $226.29, suggesting approximately 34% potential upside
Shares have declined roughly 27% year-to-date in 2026

Shares of Reddit experienced a sharp 9% decline on Wednesday following a Wall Street Journal report indicating the platform has been internally evaluating whether to terminate Google’s access to its content for artificial intelligence model training purposes.

Reddit, Inc., RDDT

The social media platform entered into a $60 million annual agreement with Google in 2024, granting the search giant licensing rights to utilize Reddit’s user-generated content for AI model development. With this arrangement approaching its expiration date, both companies have entered discussions regarding a potential extension.

The complication? Google’s AI-enhanced search functionality is diminishing referral traffic to external websites, prompting Reddit executives to reassess the strategic value of maintaining the partnership.

Reddit isn’t alone in experiencing this challenge. Data from Semrush reveals that USA Today’s organic Google search traffic from domestic audiences plummeted nearly 50% during the twelve-month period ending June 2026. Similarly, Politico experienced a 23% decrease, CNN saw approximately 25% losses, and Business Insider suffered a dramatic decline 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 actually drive traffic throughout the internet ecosystem and contribute to publisher audience expansion.

Beyond Google, Reddit maintains an additional data licensing partnership with OpenAI. During a recent earnings conference call, CEO Steve Huffman characterized both agreements as “very meaningful” and emphasized the mutually beneficial nature of these relationships.

Advertising Revenue Continues Strong Performance

Setting aside concerns surrounding the Google partnership, Reddit’s advertising platform continues demonstrating robust momentum. First-quarter advertising revenue climbed 74% year-over-year and comprised 94% of total revenue generation. Total Q1 revenue reached $663 million, representing a 69% increase compared to the same period last year.

Reddit Max, the platform’s AI-driven advertising campaign solution, is contributing significantly to this expansion. Advertisers utilizing the tool reported an average 17% reduction in cost per action alongside a 25% improvement in conversion rates. The company’s adjusted EBITDA margin expanded from 29.4% to 40.1% on a year-over-year basis.

Data licensing operations, encompassing both the Google and OpenAI partnerships, generated $39 million during Q1. Second-quarter guidance projects revenue growth of approximately 44%.

Valuation Analysis and Analyst Perspectives

Reddit currently trades near $168.78, translating to approximately 10x anticipated 2026 sales and roughly 34x forward earnings. This represents a premium valuation compared to Meta at 19x and AppLovin at 25x, though Reddit’s accelerated growth trajectory provides justification for the higher multiple.

Certain analysts have identified a more attractive entry opportunity within the $140–$150 price range, 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 approximately 34% upside potential from present levels.

Reddit has scheduled its Q2 earnings release for July 30. The stock has depreciated approximately 27% since the beginning of 2026.

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