Reddit beat on everything that pays the bills and fell 22 percent anyway. I am aiming to rebuy at $136.
- The AlertReddit is at $138.69, down 22.1 percent today and already through its 13-week low of $139.63. I am aiming to rebuy at $136, which is where the .618 retracement sits.
- The SetupThe bear flag is nearly played out and price is sweeping the lows, which is where these measured moves tend to finish rather than start.
- The ThesisRevenue grew 61 percent, so the financial engine is fine. The problem is US user growth and the search dependency, and my view is that the stock re-rates once a Google contract is signed.
Reddit made far more money than anyone expected. What spooked the market was not the money, it was where the people are coming from. A lot of Reddit's visitors arrive by clicking a Google search result, and management admitted that traffic has turned volatile. So investors looked past a great quarter and asked a harder question: if Google sends fewer people, does the money keep growing?
That is why a 61 percent revenue print and a 22 percent share price fall can happen on the same day. The quarter was about the past. The selling is about who controls Reddit's front door.
| Fib | Price | What it is |
|---|---|---|
| 0 | $282.95 | The swing high the grid is drawn from |
| 0.236 | $226.81 | First shelf on the way down, long gone |
| 0.382 | $192.07 | Broken before earnings |
| 0.5 | $164.00 | Gapped straight through on the print |
| Now | $138.69 | −22.1% on the day, sitting just above the .618 |
| 0.618 | $135.93 → my buy $136 | The golden-pocket level and my rebuy |
| 0.786 | $95.96 | Where it goes if the .618 fails outright |
| 1 | $45.05 | The origin low of the move |
A fibonacci grid is just a way of measuring how much of a big move has been given back. Reddit ran from about 45 dollars up to 283 dollars, and these lines mark the standard retracement checkpoints on the way back down. The one that matters is the 0.618 level at $135.93, because that is the point where roughly two thirds of the entire advance has been surrendered. Traders watch it closely, which is part of why it tends to attract buyers.
The blue channel on the chart is the bear flag. Price had been drifting upward inside those two lines since the spring low, and earnings knocked it straight out the bottom. That is what a flag breaking looks like, and the move it implies runs into exactly the zone we are now entering.
So the two things line up. The measured move from the broken channel and the .618 retracement point at the same area around 136 dollars. That is not a prediction that it holds — it is why that is the level I am willing to bid at rather than guessing somewhere in the middle.
| Metric | Result | vs expected |
|---|---|---|
| Revenue | $805M · +61% YoY | beat ($745M est) |
| EPS | $1.25 | beat by ~32% (~$0.95 est) |
| Adjusted EBITDA | $343M · 43% margin · +106% | more than doubled |
| Growth streak | 8 quarters above 60% | — |
| International revenue | +84% | carrying the story |
| Q3 guide | $860–870M rev · $385–395M EBITDA | +47–49% growth continues |
My six takeaways from the call, and none of them are about revenue.
| # | Takeaway | The number |
|---|---|---|
| 1 | User growth is the problem. Headline DAU looks fine until you split it — the US daily number has stalled while logged-out users do the heavy lifting | DAUq +18% to 130.3M, but US only +6% vs intl +28%. Logged-out +27%, logged-in +7%. Weekly 514.6M (+24%) |
| 2 | Search referrals are choppy and management said so. They explicitly flagged volatility later in the quarter offsetting product-driven DAU gains. Visibility remains low | The same structural risk the market has feared — Reddit still leans on search more than a true daily destination |
| 3 | The 100M US DAU goal is still aspirational. Huffman repeated it, but current US dailies plus the search headwind make the timeline longer, not shorter | Product work is real — retention +50% relative, better feeds, app upsells — but not yet visible in US dailies |
| 4 | No meaningful AI licensing progress. After quarters of speculation about data deals, no new announcement | Other revenue only +24% to $43M — narrower growth story than hoped |
| 5 | International is carrying the user story. The US remains the higher-monetisation market and the one lagging on daily engagement | +84% intl revenue, +28% intl DAU |
| 6 | Q3 guide is fine but not enough. Continues the high-growth, high-margin trend without addressing the user concern that drove the selling | $860–870M / $385–395M |
Bottom line: the financial engine is very strong. The user engine — US daily actives and search dependency — is not. The market is pricing the second far more heavily than the first, and until Reddit shows cleaner US DAU acceleration with less reliance on volatile search referrals, strong revenue prints alone are unlikely to re-rate the stock.
Here is the piece that reframes the bear case. Across the entire history of US daily actives there have been only three quarter-on-quarter declines, and the current one is the third. The first two both resolved higher.
| Dip | The decline | What happened next |
|---|---|---|
| 1 · 2022 | Mar 26.9 → Jun 26.3 (−2.2%) | Ran to 48.2M by Sep 2024 — +83% over 9 quarters |
| 2 · 2024 | Sep 48.2 → Dec 48.0 (−0.4%) | Ran to 53.5M by Mar 2026 — +11% over 5 quarters |
| 3 · Now | Mar 53.5 → Jun 53.2 (−0.6%) | This is the quarter that just caused a 22% selloff |
So the flat quarter that spooked the market is not unprecedented — it is the third instance of a pattern that previously marked a pause rather than a peak. That supports buying weakness rather than selling it, and it is the strongest argument in favour of the $136 level.
I hold the same read on the quarter, with two additions. First, the DAU dip above has precedent — twice before, and both times it resumed. Second, I think the stock comes back once we see a Google contract get signed. That is the specific catalyst, and it is worth being precise about why.
The current fear and the eventual fix are the same event. Reddit is being marked down because its Google relationship is unresolved — the old 60 million dollar a year deal is expiring and management has been pushing for dynamic pricing rather than a flat fee, so compensation scales as Reddit content becomes more essential to AI answers. Point 4 above, the lack of licensing progress, is the market's evidence that this is stuck.
But Reddit's leverage is real: its human conversations are among the most-cited sources in AI-generated answers. A signed deal would do two things at once — restore the licensing revenue line that just disappointed, and remove the overhang that is compressing the multiple. That is why I am buying the level, not selling the story.
| Field | Detail |
|---|---|
| Ticker | $RDDT · Reddit Inc |
| Current price | $138.69 · −22.1% today |
| Rebuy trigger | $136.00 — the .618 retracement |
| Distance | roughly 5% below current price |
| Setup | Bear flag nearly complete, sweeping the 13-week low |
| Catalyst I want | A signed Google licensing contract |
| Invalidation | A clean break and hold below the 52-week low at $119.27 |