Reddit stock craters on reports of souring Google deal

Reddit RDDT stock has come under pressure this morning amidst reports of a high-stakes stand-off with Google over artificial intelligence (AI) data licensing and search traffic.

According to The Wall Street Journal, RDDT is threatening to “block” Google from scraping its platform for AI model training as the two negotiate a renewal of their existing data-licensing deal.

The WSJ report arrives at a time when Reddit stock is already gasping for upward momentum; at the time of writing, it’s down nearly 30% versus the start of this year.

Why isn’t Reddit happy with its deal with Google?

In 2024, Reddit signed an estimated $60 million (approx. Rs 16.8 billion) a year agreement allowing Google to ingest forum posts for AI training.

But now that the company is threatening to walk away, investors are pricing in the risk that RDDT could lose lucrative licensing revenue.

Reddit’s primary frustration stems from Google’s expanded AI Overview answer boxes at the top of search results.

These artificial intelligence-enabled summaries answer user queries directly on the search page – drastically cutting into the click-through traffic Reddit relies on to feed its core ad-based business.

RDDT shares are also crumbling because this news coincides with a broader tech rout as investors trim high-flying software and chip names ahead of major mega-cap tech earnings.

What the loss of Google deal would mean for RDDT stock

Investors are bailing on Reddit shares today primarily because the company faces a huge dilemma as it negotiates a renewal of its agreement with Google.

If RDDT licenses its human-generated discussions to a search engine, AI answer engines cannibalize its referral traffic.

But if it cuts off access, it risks both losing “high-margin” licensing income and being de-ranked or hidden in standard search indexing.

Until there’s more clarity on whether the licensing deal is renewed on favorable terms – or if Reddit can defend its organic search traffic – the market is treating the conflict as a headwind to both ad- revenue and data-licensing growth.

How to play Reddit shares as they tumble on Wednesday?

Reddit has grown at an attractive pace in recent quarters on the back of its role in AI training.

In fact, the company is expected to report $0.99 a share of earnings (EPS) for its current financial quarter in late August, more than double last year’s figure.

And that’s part of the reason why Wall Street analysts remain uber bullish on RDDT stock for the remainder of 2026.

The consensus rating on it sits at Moderate Buy currently, with the mean price target of $224 indicating potential upside of more than 30% over the next 12 months.

However, things could be meaningfully different for Reddit moving forward if the aforementioned agreement with Google ends up falling apart – and that’s what's weighing on its share price on July 22^nd.