Reddit Stock sits near $145 to $150, down roughly 27% over twelve months while revenue grew 61% year over year in Q2 to $805 million. The disconnect is multiple compression: the market is paying fewer dollars per dollar of earnings because of one specific risk. Reddit's dependence on Google search traffic for user acquisition is being challenged by AI Overviews, and the stock is being repriced around that uncertainty.

Reddit flagged in its Q2 shareholder letter that "search referrals were choppy in the quarter." Google's AI Overviews may be reducing the clicks that historically drove users from search results to Reddit threads. Since search is Reddit's primary discovery channel, any narrowing of that funnel threatens the growth rate even if existing users remain engaged.

The Q2 numbers were strong: $805 million revenue, $1.25 EPS beat, Q3 guidance of $860 million to $870 million above consensus. The stock still dropped 11% post-earnings. The market is pricing future deceleration risk, not current performance.

Reddit joined the S&P 500 on August 18, triggering a 12% to 13% rally to roughly $178. The inclusion creates passive index fund buying pressure. But the structural positive was overwhelmed by the search risk, a director's $820 million share sale, and Morgan Stanley cutting its target from $240 to $210. The stock has since fallen back toward $145 to $150.

I trade RDDT through perpetual futures on Bitunix. The perpetual tracks the Reddit Stock price without ownership rights and without paying dividends. For a stock that can move 10% on earnings and 12% on index news, defined stops and directional flexibility are worth more to me than equity holding.

Two catalysts matter: evidence that search traffic is stabilizing in Q3 data, and Reddit demonstrating an alternative user acquisition channel that reduces Google dependency. Until one lands, the stock likely trades in the $130 to $180 range with sharp event-driven swings. The 52-week spread from $119 to $283 captures the market's uncertainty.

Multiple compression on strong fundamentals is a dislocation that event-driven traders can work with. I trade both directions through perpetuals with 3x to 5x leverage and 2% stops. Your risk tolerance may lead you to hold equity for the potential re-rating instead, and that is a valid approach if your time horizon extends past the near-term search data noise.

One angle worth considering is the social media sector correlation. When Meta or Snap report strong ad results, Reddit Stock tends to benefit from sector sentiment. When peers disappoint, RDDT sells off in sympathy. Some of the current weakness may reflect broader ad sector uncertainty rather than Reddit-specific risk.

I also monitor the Reddit Stock and VIX correlation during earnings windows. When the VIX is elevated going into RDDT earnings, the post-report move tends to be larger in both directions because options market makers are hedging more aggressively. When the VIX is low, the reaction is more muted. This has helped me calibrate my leverage and stop distance around earnings events.

The geographic revenue breakdown is another underappreciated data point. International revenue grew faster than U.S. revenue in Q2. If international users are acquired through channels other than Google search, the search risk may be geographically bounded rather than company-wide. I track this split quarterly as a potential early indicator that the bear case is weakening.

The honest answer to why Reddit Stock is down is multiple compression on a single risk, and the market is treating that risk as confirmed before the data has actually deteriorated. Whether that is prudent caution or overcorrection is the trade. The bottom line on why Reddit Stock is down: the market is pricing a forward risk that has not materialized in actual revenue. Revenue grew 61%. Earnings beat. Guidance beat. The stock still dropped because one sentence in a shareholder letter changed the narrative. For event-driven traders, this kind of disconnect between fundamentals and price action is exactly the setup worth monitoring. The correction resolves when the data confirms or denies the risk, and Q3 earnings will provide that data.

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Why is Reddit Stock down? One risk is driving the repricing. Whether that risk is overdone is the trade to evaluate.