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Reddit Plunges 36% Year to Date: Should You Buy the Stock on the Dip?
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Key Takeaways
Reddit shares are down 35.7% YTD as weaker search referrals and digital ad competition pressure the stock.
Reddit's daily active uniques rose 18% in Q2, while weekly active uniques climbed 24% year over year.
Reddit Max usage rose more than 60% from Q1, while revenues from Max campaigns increased more than 150%.
Reddit (RDDT - Free Report) shares have plunged 35.7% in the year-to-date period, underperforming the broader Zacks Computer & Technology sector’s 24.7% increase. The Zacks Internet - Software industry has also increased 10% in the same time frame.
The company’s shares have also underperformed its peers, which include Pinterest (PINS - Free Report) , Meta Platforms (META - Free Report) and Snap (SNAP - Free Report) . These companies are expanding their footprint in the digital advertising market. Shares of Meta Platforms have gained 10.3%, while Pinterest and Snap have lost 25.6% and 30.9%, respectively, in the year-to-date period.
The dip can be explained by irregular and declining search referral traffic, especially toward the end of the second quarter of 2026, causing a slight decrease in the number of daily active users and increasing volatility. The lack of insight into external search trends still poses a problem. Difficult macroeconomic uncertainties and the intense competition in the digital advertising market remain concerns.
RDDT Stock Performance
Image Source: Zacks Investment Research
Despite these headwinds, Reddit’s expanding advertising portfolio, strong user engagement, including rising daily and weekly active users, gains in Average Revenue Per Unique (ARPU) and the expansion of advertiser tools such as Dynamic Product Ads, Reddit Pixel and CAPI have been key catalysts. These factors are helping Reddit to fend off its competitors like Pinterest, Snap and Meta Platforms.
RDDT Benefits From Expanding Portfolio
Reddit’s expanding portfolio has been a key catalyst in driving the company’s user engagement. In the second quarter of 2026, Reddit reported 130.3 million daily active uniques, up 18% year over year, and 514.6 million weekly active uniques, up 24% year over year.
RDDT is benefiting from successful product innovation and user engagement strategies. The company’s focus on improving the experience for new users, particularly through updated feed models and easier posting mechanisms, has led to a 50% year-over-year increase in new app user retention in the second quarter of 2026. Features like video in comments and interactive games have expanded engagement opportunities. At the same time, efforts to convert web users to app users have resulted in higher retention and more valuable user cohorts.
The company’s innovation in its ad stack has been a major growth driver. The launch and rapid adoption of Reddit Max, an AI-driven suite for ad automation and optimization, has delivered significant results. Advertiser usage of Max grew more than 60% from the first quarter, and revenues from Max campaigns increased by more than 150%. Features like tailored creatives and dynamic product ads are helping brands achieve better outcomes, such as Lenovo’s 40% higher purchase value with Max campaigns compared to standard campaigns.
Further expanding its portfolio, in September 2026, Reddit made its AI-powered Max campaigns available to all advertisers following a beta launch earlier this year. Max campaigns automate targeting, creative selection, placements, and budget allocation while allowing advertisers to retain strategic control. Reddit said early tests delivered 17% lower cost per acquisition and more than 27% higher conversions versus standard campaigns. The company also added Advertising API support, integration with Smartly and new asset groups, enabling advertisers to manage multiple creative sets within a single campaign and assess performance separately.
RDDT Benefits From Expanding Global Footprint
Reddit is benefiting from the rapid expansion of its global user and advertiser footprint, which is strengthening its competitive position.
In the second quarter of 2026, Reddit’s international revenues surged 84% year over year to $166.8 million, outpacing 56% growth in U.S. revenues. International daily active uniques (DAUq) increased 28% to 77.1 million, while international weekly active uniques (WAUq) jumped 35% to 317.4 million. The expanding international audience strengthens Reddit’s ability to attract global advertisers.
Improving monetization of this expanding overseas audience is another key catalyst. International average revenue per unique increased 31% year over year to $2.26 from $1.73. Meanwhile, global ARPU rose 36% to $6.18 from $4.53, supported by higher advertising pricing and impressions.
Earnings Estimates for Reddit Show Upward Trend
RDDT’s expanding portfolio and rising user engagement are expected to drive the company’s top-line growth.
For the third quarter of 2026, management expects revenues between $860 million and $870 million, representing 47% to 49% year-over-year growth. The midpoint implies about 48% year-over-year growth. The Zacks Consensus Estimate for third-quarter revenues is pegged at $886.35 million, indicating year-over-year growth of 51.54%.
For the third quarter, the consensus mark for earnings is pegged at $1.30 per share, which has increased 2.25% over the past 30 days. This implies year-over-year growth of 62.50%.
Reddit stock is currently trading at a premium, as suggested by the Value Score of D.
In terms of the forward 12-month Price/Sales ratio, RDDT is trading at 6.70X, higher than the broader Zacks Computer & Technology sector’s 6.18X.
RDDT Valuation
Image Source: Zacks Investment Research
Conclusion
Reddit’s prospects benefit from an expanding portfolio and rising user engagement. These factors justify the company’s premium valuation.
RDDT stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Reddit Plunges 36% Year to Date: Should You Buy the Stock on the Dip?
Key Takeaways
Reddit (RDDT - Free Report) shares have plunged 35.7% in the year-to-date period, underperforming the broader Zacks Computer & Technology sector’s 24.7% increase. The Zacks Internet - Software industry has also increased 10% in the same time frame.
The company’s shares have also underperformed its peers, which include Pinterest (PINS - Free Report) , Meta Platforms (META - Free Report) and Snap (SNAP - Free Report) . These companies are expanding their footprint in the digital advertising market. Shares of Meta Platforms have gained 10.3%, while Pinterest and Snap have lost 25.6% and 30.9%, respectively, in the year-to-date period.
The dip can be explained by irregular and declining search referral traffic, especially toward the end of the second quarter of 2026, causing a slight decrease in the number of daily active users and increasing volatility. The lack of insight into external search trends still poses a problem. Difficult macroeconomic uncertainties and the intense competition in the digital advertising market remain concerns.
RDDT Stock Performance
Image Source: Zacks Investment Research
Despite these headwinds, Reddit’s expanding advertising portfolio, strong user engagement, including rising daily and weekly active users, gains in Average Revenue Per Unique (ARPU) and the expansion of advertiser tools such as Dynamic Product Ads, Reddit Pixel and CAPI have been key catalysts. These factors are helping Reddit to fend off its competitors like Pinterest, Snap and Meta Platforms.
RDDT Benefits From Expanding Portfolio
Reddit’s expanding portfolio has been a key catalyst in driving the company’s user engagement. In the second quarter of 2026, Reddit reported 130.3 million daily active uniques, up 18% year over year, and 514.6 million weekly active uniques, up 24% year over year.
RDDT is benefiting from successful product innovation and user engagement strategies. The company’s focus on improving the experience for new users, particularly through updated feed models and easier posting mechanisms, has led to a 50% year-over-year increase in new app user retention in the second quarter of 2026. Features like video in comments and interactive games have expanded engagement opportunities. At the same time, efforts to convert web users to app users have resulted in higher retention and more valuable user cohorts.
The company’s innovation in its ad stack has been a major growth driver. The launch and rapid adoption of Reddit Max, an AI-driven suite for ad automation and optimization, has delivered significant results. Advertiser usage of Max grew more than 60% from the first quarter, and revenues from Max campaigns increased by more than 150%. Features like tailored creatives and dynamic product ads are helping brands achieve better outcomes, such as Lenovo’s 40% higher purchase value with Max campaigns compared to standard campaigns.
Further expanding its portfolio, in September 2026, Reddit made its AI-powered Max campaigns available to all advertisers following a beta launch earlier this year. Max campaigns automate targeting, creative selection, placements, and budget allocation while allowing advertisers to retain strategic control. Reddit said early tests delivered 17% lower cost per acquisition and more than 27% higher conversions versus standard campaigns. The company also added Advertising API support, integration with Smartly and new asset groups, enabling advertisers to manage multiple creative sets within a single campaign and assess performance separately.
RDDT Benefits From Expanding Global Footprint
Reddit is benefiting from the rapid expansion of its global user and advertiser footprint, which is strengthening its competitive position.
In the second quarter of 2026, Reddit’s international revenues surged 84% year over year to $166.8 million, outpacing 56% growth in U.S. revenues. International daily active uniques (DAUq) increased 28% to 77.1 million, while international weekly active uniques (WAUq) jumped 35% to 317.4 million. The expanding international audience strengthens Reddit’s ability to attract global advertisers.
Improving monetization of this expanding overseas audience is another key catalyst. International average revenue per unique increased 31% year over year to $2.26 from $1.73. Meanwhile, global ARPU rose 36% to $6.18 from $4.53, supported by higher advertising pricing and impressions.
Earnings Estimates for Reddit Show Upward Trend
RDDT’s expanding portfolio and rising user engagement are expected to drive the company’s top-line growth.
For the third quarter of 2026, management expects revenues between $860 million and $870 million, representing 47% to 49% year-over-year growth. The midpoint implies about 48% year-over-year growth. The Zacks Consensus Estimate for third-quarter revenues is pegged at $886.35 million, indicating year-over-year growth of 51.54%.
For the third quarter, the consensus mark for earnings is pegged at $1.30 per share, which has increased 2.25% over the past 30 days. This implies year-over-year growth of 62.50%.
Reddit Inc. Price and Consensus
Reddit Inc. price-consensus-chart | Reddit Inc. Quote
RDDT Stock Is Overvalued
Reddit stock is currently trading at a premium, as suggested by the Value Score of D.
In terms of the forward 12-month Price/Sales ratio, RDDT is trading at 6.70X, higher than the broader Zacks Computer & Technology sector’s 6.18X.
RDDT Valuation
Image Source: Zacks Investment Research
Conclusion
Reddit’s prospects benefit from an expanding portfolio and rising user engagement. These factors justify the company’s premium valuation.
RDDT stock currently carries a Zacks Rank #2 (Buy) and has a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks proprietary methodology. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.