John Ballard, The Motley Fool

Mon, Jun 9, 2025, 12:05 PM4 min read

• Wall Street sees Google's move to AI-powered search summaries as a threat to Reddit's growth prospects.

• Reddit said revenue from advertising grew 61% year over year in the first quarter.

• Positive advertising metrics point to growing engagement from Reddit's 108 million daily active users.

• 10 stocks we like better than Reddit ›

After soaring in 2024, shares of Reddit (NYSE: RDDT) are down about 25% in 2025, as of this writing. Reddit has continued to report impressive revenue growth as proof of its appeal to brands in a growing digital advertising market.

However, opinions on Wall Street have been mixed lately. This stems from Google's recent shift to artificial intelligence (AI) search summaries. Reddit wants as many visitors to its platform as possible to maximize its appeal to advertisers, but analysts believe Google's AI Overviews and other changes to its search algorithms will remove the need for people to go to Reddit.

While investors should be mindful of this threat, there's still good reason to believe Reddit can deliver more growth for investors.

Many Reddit users are looking for information on products they're thinking of buying. This is why advertisers continue to increase their spending on the platform -- ad revenue grew 61% year over year to $359 million in the first quarter.

But there is a threat from AI models like ChatGPT, Grok, and Google's Gemini, which can summarize all of the information a user needs based on simple search queries. Perplexity already has a deal with Shopify to let users buy products they find using its AI search engine.

Google's integration of AI in its search engine could pose a threat to Reddit's dependency on Google Search results to attract users. Wells Fargo analyst Ken Gawrelski downgraded the stock from overweight to equal weight after Reddit's first-quarter earnings report. The analyst believes Google's move toward AI-driven search will likely lead to declines in traffic to Reddit.

It's essential for investors to be aware of the challenge these AI models pose to Reddit's business. That said, these models have been around for several years now, and the company is still posting strong user and revenue growth. There is one important advantage Reddit has that AI can't compete with.

AI models are very efficient at providing summaries and answers, but it's not the same as interacting with other people. Even while usage of AI models increases, there will still be demand for online social interaction, which AI summaries can't quite replace.