Will Class Action Over Google AI Impact Reddit’s (RDDT) Traffic Narrative or Reveal Broader Risks?

• Bragar Eagel & Squire, P.C. announced that a class action lawsuit was filed against Reddit, Inc. in the United States District Court for the Northern District of California on behalf of investors who acquired Reddit securities between October 29, 2024, and May 20, 2025, alleging misleading disclosures about the effects of Google's new AI-powered search changes on Reddit's traffic and advertising outlook.
• This development follows a period of analyst downgrades and highlights how emerging shifts in search technology can directly influence social media business models and investor sentiment.
• We'll examine how concerns about lower Reddit user traffic linked to Google's AI search updates may reshape the company's investment narrative.

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Reddit Investment Narrative Recap

To own Reddit, investors need confidence that the platform can extend its strong revenue and profit momentum despite mounting concerns over the impact of Google’s AI-powered search on user traffic and advertising growth. The recent class action lawsuit and analyst downgrades directly challenge this narrative, spotlighting rapid technology changes as the most important risk, while user engagement and traffic trends remain key short-term catalysts, any material decline could instantly alter the outlook for Reddit’s ad-driven business.

Among Reddit’s recent announcements, the second-quarter 2025 earnings report stands out: the company posted US$499.63 million in revenue and net income of US$89.3 million, suggesting strong financial execution even as worries about Google’s AI changes and user growth persist. This earnings momentum is critical for maintaining investor confidence during periods of uncertainty driven by shifts in search technology.

But while Reddit’s expanding earnings may appear reassuring, investors should also be aware of how a sudden change in Google’s search algorithms could disrupt...

Read the full narrative on Reddit (it's free!)

Reddit's narrative projects $3.8 billion revenue and $1.0 billion earnings by 2028. This requires 31.8% yearly revenue growth and a $783.7 million earnings increase from $216.3 million today.

Uncover how Reddit's forecasts yield a $195.96 fair value, a 17% downside to its current price.

Exploring Other Perspectives

The Simply Wall St Community includes 19 individual fair value estimates for Reddit ranging from US$38 to US$301.78 per share. With rapid search technology changes now a central risk, these differing opinions highlight the importance of considering several viewpoints on the company’s potential trajectory.

Explore 19 other fair value estimates on Reddit - why the stock might be worth less than half the current price!

Build Your Own Reddit Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Reddit research is our analysis highlighting 3 key rewards that could impact your investment decision.
• Our free Reddit research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Reddit's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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