Michael Sikand
Investor, Autopilot Portfolio, Founder of Sikand Media
Reddit's Google AI contract will likely be renewed on richer terms, making the sell-off over it senseless. In a study of 30M sources across ChatGPT, Gemini, Perplexity and AI Overviews, Reddit was the single most cited domain, which gives it leverage in the renewal. The stock has nearly made back the drop. x.com
Reddit's Google data deal is likely to be renewed at a higher price, because Reddit is the most-cited source for AI systems. The market cut $3B from its value over a WSJ report that its $60M annual Google contract is in question, but the deal isn't over and both sides are negotiating; Reddit's CEO compares the renewal to M&A. Peec AI's study of 30 million sources across ChatGPT, Gemini and Perplexity ranked Reddit the single most cited domain, making the price too high for Google to walk. x.com
Reddit's logged-in users drive monetization, so weak search-driven traffic matters less than ARPU. Reddit says app and logged-in users grew sequentially in Q3 and generate over 80% of monetization, though lost search referrals also hurt them. ARPU rose 53% despite barely higher users; a low ad base could allow it to double even with muted growth. Restricting Google scraping might force a licensing deal that helps its Anthropic case and OpenAI renewal, though no deal is certain. x.com x.com x.com … Show more
Reddit's human conversations are gaining value as AI content proliferates, supporting advertiser spending and AI data licensing. Revenue grew 61% last quarter, with margins in the 40s, but US user growth slowed to 6%. Advertisers are paying more each quarter and AI labs pay for Reddit's data. Overweight; $200 target. x.com
Reddit's worsening US user growth threatens its revenue runway despite elite ARPU growth, revenue growth and margin expansion. US daily users fell 2% year over year and missed estimates by 7%; the Q4 guide was weak. It needs healthier user growth in its most important market to dispel Google/AI discovery fears. Forward indicators do not look promising, and the trend of positive estimate revisions will end. x.com x.com
Reddit's post-earnings selloff is an overreaction, as the market treats it like a 2010s media publisher rather than an AI data utility. If Google's AI Overviews surface Reddit answers instead of sending clicks, that strengthens Reddit's leverage by proving LLMs cannot work without its 26B+ posts of human consensus. In-app retention is up 50% year over year, so the SEO-dependency panic is overstated. Flat licensing deals are phase one; the endgame is usage-based pricing for real-time AI context. … Show more
Reddit is turning into a high-margin AI data infrastructure business, with a path to over $500 million a year in data licensing. Its Google and OpenAI deals already bring in more than $130 million annually at margins above 90%, institutions own 93.5% of shares with $9.1 billion of net buying, and the market underestimates this. A post the author replies to cites Reddit's CEO saying Reddit is the most-cited source across LLMs, with S&P 500 inclusion and deal renewals on the horizon. x.com x.com
Google's AI Mode no longer drives traffic to Reddit, weakening its distribution. Reddit CEO Steve Huffman said Google still crawls Reddit heavily but no longer sends it the traffic it once did, and Reddit cannot count on that traffic returning. x.com
Reddit's AI licensing is the wildcard that could make the stock run, as the market may have grown too negative on its renewals with Google and OpenAI. AI models need fresh human-generated data, and Reddit's is still undervalued. Revenue grew 61% last quarter, ad revenue 64%, and margins keep improving. Per BofA, Reddit should post the highest US and international ARPU growth of the social stocks it follows in Q3. Trading below the 200-day average is a risk, with support at $120-135. x.com x.com
Reddit's selloff over a possible end to its Google AI data deal is overdone, because Reddit owns content AI models depend on and has leverage to win usage-based pricing. Per WSJ, the roughly $60M-a-year contract has not been cancelled; it is 1.4% of 2026 consensus revenue, yet $3B of value was erased. Reddit ranks at or near the top of AI citation studies, and a UK CMA ruling lets it withhold training data while keeping search referrals. The July 30 earnings should clarify the renewal. x.com … Show more
Reddit may face short-term pressure after Morgan Stanley cut its price target from $240 to $210 while keeping Overweight, adding risk premium for possibly slowing user growth and shifting Google traffic, especially AI Overviews reducing referrals. Morgan Stanley stays positive on revenue and EPS growth, and advertising, AI data licensing and Reddit Max remain long-term catalysts. Renewed strength in Google traffic and DAU/WAU growth could bring the target back up. x.com
Reddit is well placed as the source every AI model wants to license training data from, while its ad revenue booms. Q2 revenue rose 61% to $804.9 million, operating income more than tripled to $231.7 million and net income reached $252.8 million. At about 17 times two-year forward earnings, the stock isn't expensive. x.com x.com
