The question sitting over Reddit’s earnings tonight is deceptively simple: where did the money go?
Alphabet missed Q3 expectations on earnings and revenue, its first top-and-bottom-line miss in nearly four years. The advertising lines were the sharpest point of pain. Google Search came in at $63.35 billion against a $64.85 billion estimate; YouTube advertising landed at $11.21 billion versus an $11.43 billion forecast. Both short. The instinct in markets is to read that as a demand problem, advertisers pulling back. The evidence points somewhere more specific.
Search revenue growth has been slowing for two quarters now, after being at 19% in Q1 and 17% in Q2, and Search revenue was essentially flat compared to last quarter’s $63.27 billion. On the earnings call, Google’s chief business officer Philipp Schindler offered an explanation that matters for every platform in the digital ad ecosystem: lower monetization within AI Mode was one of the reasons for the slower growth. More queries, less revenue per query. Sundar Pichai added that year-over-year query growth is the highest it has been in five years. Google is not losing searchers. It is, for now, serving them at a discount.
That distinction matters enormously for what Reddit reports after the close today. If advertisers were simply cutting budgets, the damage would show up everywhere. If budgets are intact but Google’s own product shift is temporarily compressing its monetization, that money has to settle somewhere else. Meta’s advertising revenue rose to $63.06 billion in Q3, up from $59.36 billion in Q2 and $50.08 billion in Q3 2025. Ad impressions delivered across Meta’s Family of Apps increased 10% year-over-year, and the average price per ad increased 14% year-over-year. Meta beat estimates and guided above consensus for Q4. That is not a market where advertisers are retreating broadly.
Reddit is the cleaner read on whether smaller, intent-rich platforms are capturing share. In the second quarter, advertising revenues surged 64% year over year to $762 million, supported by higher impressions and pricing. Active advertisers increased more than 70%, while revenues from the scaled channel, comprising mid-market businesses and small and mid-sized businesses, doubled year over year. Analysts are forecasting revenue growth of roughly 50% to about $875 million. The company’s own guide was $860 million to $870 million.
The stock enters tonight in a different posture than those numbers suggest. RDDT shares have plunged 39.8% in the year-to-date period, underperforming the Zacks Computer and Technology sector’s return of roughly 15%. The core concern is not the ad business; it is the traffic feeding it. The decline can be attributed to choppy and declining search referral traffic, particularly late in the second quarter of 2026, which led to a slight decrease in daily active users and heightened volatility. Reddit draws a substantial portion of its audience through Google Search, which makes the AI Mode transition a direct threat to top-of-funnel user acquisition regardless of what advertisers want to spend.
Positioning is bearish going in: short interest rose about 30% since June to roughly 22.1 million shares, the options market prices a move of about 13% either way, and insiders have made no open-market purchases since March. The stock fell 21.0% the day after the Q2 report even though revenue grew 61% and beat the top of guidance by about 11%. Growth alone did not hold it.
What to Watch
The two numbers that will separate the two interpretations are daily active uniques and average revenue per user. If DAUq holds or grows despite search traffic pressure, it signals Reddit’s audience is becoming less dependent on Google for discovery. If ARPU accelerates, it confirms that advertisers are finding the platform on its own merits, not just as a Google adjacency. Reddit Max advertisers grew over 60% from Q1 and Max revenue surged over 150%, with its broad rollout to all advertisers launching in September. Whether that September push shows up in Q3 revenue is the operative question.
The risk to the bullish read is straightforward: if Google’s AI Mode is actively diverting users away from clicking through to Reddit, ad revenue growth can hold while the audience quietly thins. That would leave the company more exposed heading into 2027 as AI search matures and Google builds more complete answers in-session. Google’s AI Overviews threaten the search-driven traffic Reddit monetizes, while the analyst Q4 consensus of about $1.05 billion would mark Reddit’s first billion-dollar quarter. Getting there requires the audience, not just the advertiser.
Alphabet’s miss was a story about a platform cannibalizing its own revenue as it transitions to AI. Tonight’s question is whether Reddit is catching the overflow or facing the same headwind from a weaker position.
