Reddit (RDDT) shares closed sharply lower on July 22 following reports of an escalating dispute over the company’s artificial intelligence (AI) data licensing agreement with Alphabet's (GOOG) (GOOGL) Google.
According to the Wall Street Journal, Reddit is considering restricting the giant’s access to its platform for AI training or demanding much higher fees to renew the deal.
Including today’s decline, Reddit stock is down nearly 30% versus the start of this year.
What’s the Reddit-Google Feud About?
The standoff centers on Reddit’s growing frustration with how Alphabet uses its forum data on its search page.
Under the original agreement, the titan secured real-time access to RDDT’s massive content library to train its Gemini models and enrich search queries.
However, Reddit executives are now pushing back as Google expands AI-driven search overviews.
According to them, the multinational is scraping community discussion to construct instant answer summaries directly on the search results page.
This monetizes Reddit’s intellectual property while withholding the referral web traffic that drives its core advertising revenue.
Why This Conflict Is a Catch-22 for Reddit Stock
The conflict creates a strategic dilemma for Reddit’s leadership.
If the company plays hardball and cuts off Alphabet’s crawler access, it risks surrendering a high-margin licensing revenue stream while potentially crashing its organic search rankings as well — a primary funnel for onboarding new active users.
Conversely, renewing the agreement on the current terms will enable artificial intelligence search features to continue absorbing user intent without sending visitors to Reddit.
In short, investors are concerned that Reddit cannot distance itself from Google without hurting its traffic and revenue trajectory.
What to Expect From Reddit Moving Forward
Reports of a Reddit-Google feud arrive just days before the forum social media platform is set to report its Q2 earnings. Consensus is for the company to post $0.99 per share of earnings, more than double its EPS in the same quarter last year.
Expectations of such massive bottom-line growth are keeping Wall Street bullish on RDDT shares. The consensus rating on the firm sits at “Moderate Buy” currently, with the mean price target of nearly $224 signaling potential upside of more than 30% from here.
However, the reported friction with Alphabet alone has the power to reshape Reddit's earnings trajectory and analysts’ estimates moving forward.
On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.