Reddit shares tumbled 10.81% in a 24-hour plunge on Friday, as the social media platform's second-quarter results failed to impress investors despite a significant earnings beat. The decline was triggered by a classic "sell-the-news" reaction after the company reported earnings of $1.25 per share, far exceeding the consensus estimate of $0.95, and revenue surged 61% to $805 million.

However, investors focused on slowing growth in U.S. daily active users, which slipped to 53.2 million from 53.5 million in the prior quarter, and a deceleration in revenue growth from 69% in Q1 to 61% in Q2. Management flagged choppy search-referral traffic and SEO headwinds, while lingering concerns about the potential non-renewal of a $60 million annual AI content licensing agreement with Google and the disruptive impact of AI overviews on user traffic added to the negative sentiment. Multiple analysts, including J.P. Morgan, Jefferies, and Piper Sandler, cut their price targets on the stock following the report.

The stock's sharp decline reflects profit-taking after a pre-earnings rally, as well as broader market anxiety about Reddit's ability to sustain user growth in an AI-driven internet landscape. Despite the strong Q2 results, the combination of slowing user momentum and AI-related uncertainties prompted investors to reassess the company's valuation.