Key Highlights
- RDDT shares declined 9% following reports the platform may terminate Google’s content access for AI model training
- The existing $60 million annual agreement with Google is approaching expiration, with renewal negotiations underway
- Advertising revenue surged 74% compared to the same quarter last year, representing 94% of overall revenue
- Analyst consensus price target stands at $226.29, suggesting approximately 34% potential upside
- Shares have fallen roughly 27% year-to-date in 2026
Shares of Reddit experienced a significant 9% decline on Wednesday following a Wall Street Journal report revealing the company has held internal conversations about potentially terminating Google’s access to its platform content for artificial intelligence training purposes.
In 2024, Reddit entered into an agreement with Google worth $60 million annually, granting the search giant permission to utilize Reddit’s content for training its AI models. As this arrangement approaches its expiration date, both companies have entered into discussions regarding potential renewal.
The complication? Google’s integration of AI-generated responses directly into search results is significantly diminishing referral traffic to external websites, prompting Reddit executives to reconsider the partnership’s strategic value.
Reddit isn’t alone in experiencing this impact. Data from Semrush reveals that USA Today experienced a nearly 50% decline in organic Google search traffic from United States readers during the twelve-month period ending June 2026. Politico saw a 23% decrease, CNN experienced approximately 25% lower traffic, and Business Insider suffered a dramatic drop exceeding 85%.
“This is existential for some categories of publishers,” said David Buttle, CEO of media consulting firm DJB Strategies.
Google has defended its position, asserting that its AI-enhanced search features actually drive traffic throughout the internet ecosystem and support publishers’ efforts to expand their audiences.
Reddit maintains an additional data licensing partnership with OpenAI. During a recent quarterly earnings conference call, CEO Steve Huffman discussed both agreements, characterizing them as “very meaningful” while emphasizing the reciprocal nature of these relationships.
Advertising Revenue Maintains Strong Momentum
Notwithstanding the uncertainty surrounding the Google partnership, Reddit’s advertising platform continues demonstrating robust performance. First quarter advertising revenue climbed 74% year-over-year and comprised 94% of total company revenue. Total Q1 revenue reached $663 million, representing a 69% increase compared to the prior year period.
Reddit Max, the platform’s artificial intelligence-driven advertising campaign management tool, is contributing significantly to this expansion. Advertisers utilizing this technology have reported an average 17% reduction in cost per action alongside a 25% improvement in conversion rates. The company’s adjusted EBITDA margin improved 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 the first quarter. Management’s second quarter guidance indicates anticipated revenue growth of approximately 44%.
Current Valuation and Analyst Perspectives
Reddit shares are currently trading near $168.78, reflecting a valuation of approximately 10x anticipated 2026 sales and roughly 34x forward earnings. This represents a premium compared to Meta’s 19x multiple and AppLovin’s 25x, though Reddit’s accelerated growth trajectory provides justification for the elevated valuation.
Several analysts have identified a more attractive entry opportunity within the $140ā$150 price range, which would compress the forward earnings multiple to approximately 28xā30x.
The consensus Wall Street price target currently stands at $226.29, derived from 13 Buy recommendations and eight Hold ratings ā indicating potential upside of approximately 34% from present trading levels.
The company is slated to announce its second quarter financial results on July 30. Year-to-date, the stock has declined approximately 27% since January 2026.
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