On July 31, Reddit fell nearly 9% in pre-market trading. The decline followed the release of Q2 earnings that broadly beat expectations but revealed slowing US user momentum.

Reddit reported Q2 revenue of $804.9 million, up 61% year-over-year and well above the consensus estimate of $730.3 million. Adjusted EPS came in at $1.25, beating the $0.95 estimate by 31.58%. Q3 guidance of $860-$870 million in revenue also exceeded the Street estimate of $828.4 million. However, US daily active user growth decelerated to 6% quarter-over-quarter from 7% in Q1, raising concerns about domestic engagement trends.

Adding to the selling pressure, JPMorgan cut its target price to $185 and Piper Sandler lowered its target from $215 to $195. The combination of decelerating user growth, analyst downgrades, and a stock that had already recovered from a prior dip created conditions for a classic sell-the-news reaction despite the strong financial results.

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