Reddit's stock took a hit, dropping 9%, after a report emerged suggesting the company might not renew its lucrative deal with Google for AI content usage. This news comes as a shock, especially considering the significant impact Google's AI summaries have had on reducing traffic to websites from search results. The partnership, which began in 2024, allowed Google to train its AI models on Reddit's content, a move that has raised questions about the platform's data licensing business. With Google's AI summaries reducing traffic to websites, Reddit is now reconsidering the benefits of the deal, a decision that could have far-reaching implications for the company's future.
This isn't the first time Reddit has partnered with a tech giant for AI training. The company has a similar arrangement with OpenAI, which has been instrumental in boosting Reddit's earnings. During the first quarter, Reddit's revenue jumped 69% year-over-year, surpassing analysts' expectations with earnings per share of $1.01, compared to the estimated 58 cents. This success can be attributed, in part, to its data licensing business, which includes partnerships with both Google and OpenAI.
Reddit CEO Huffman emphasized the importance of these partnerships during the earnings call, stating, 'We have important partnerships with both Google and OpenAI. Those are very meaningful to us, and I think it's mutual. We continue to value those.' However, the potential termination of the Google deal raises concerns about the stability of Reddit's revenue streams and its ability to maintain its recent success.
The impact of Google's AI summaries on website traffic is evident across various platforms. Politico's Google traffic fell by 23%, CNN's by about 25%, and Business Insider's by more than 85% between June 2025 and 2026. This trend highlights the significant role that AI-driven search results play in shaping online behavior and the potential consequences for content creators.
As Reddit prepares to report its second-quarter earnings on July 30, the company faces a critical juncture. The decision to renew or terminate the Google deal will have a profound impact on its future trajectory. With the tech landscape constantly evolving, Reddit must carefully consider its strategic alliances to ensure long-term success and maintain its position as a leading platform in the digital realm.
