Reddit grows 61 percent, joins the S and P 500 and is still down 30 percent

Reddit will be admitted to the American benchmark index S and P 500 on 18 August. The index provider S and P Dow Jones Indices announced that on 14 August. The share then rose around 12.6 percent in after hours trading.

The company replaces the property group AvalonBay Communities, which leaves the index after a merger agreement.

Despite that news and despite strong growth, the share was down almost 30 percent for the year at the time of the announcement. At a pre market price of around 178 dollars that gave a valuation of more than 33 billion dollars. A year earlier the paper had traded above 270 dollars.

The short version

• Reddit joins the American benchmark index on 18 August, and the share then rose around 12.6 percent after hours.
• Revenue rose 61 percent in the second quarter of 2026 to 805 million dollars, of which 762 million came from advertising.
• Despite that the share was down almost 30 percent for the year at the time of the announcement.

Advertising carries almost all of the revenue

The business figures do not explain the share price loss. In the second quarter of 2026 Reddit generated revenue of 805 million dollars, up 61 percent. Of that, 762 million dollars came from advertising, around 95 percent.

Adjusted earnings before interest, tax, depreciation and amortisation were 343 million dollars. For the third quarter the company signals revenue of 860 to 870 million dollars.

That concentration on advertising revenue is both a strength and a weakness. It makes the business simple and high margin, but ties it entirely to the number of visitors.

The worry is about traffic

That is exactly where the reason for the share price development sits. Investors fear that answer systems using artificial intelligence will answer questions directly and that fewer people will therefore reach the platform.

The mechanism is easy to follow. A considerable part of the traffic on Reddit arises because search engines send users to discussions in which real people have answered a question. If an answer system summarises that information and delivers it directly, the visit does not happen.

Without a visit there is no advertisement, and without an advertisement no revenue.

The same technology as a possible source of revenue

On the other side stands an argument that could turn the same development into an advantage. The stock of discussions written by people counts as particularly valuable for training language models.

Such data is hard to replace. Anyone who wants to train a model on texts containing actual experience, opinion and everyday knowledge finds few comparable sources for it.

From that arises the possibility for Reddit of concluding licence agreements with the operators of such models and monetising the data.

The same company is therefore both a possible loser and a possible winner from the same technology. Which side prevails cannot currently be answered seriously by anyone. Share price moves in both directions therefore reflect shifting mood rather than new information.

Why an index inclusion moves the price

The jump after the announcement has nothing to do with the business at first. Numerous funds replicate indices exactly and have to buy an included company regardless of their own view.

Demand arises that says nothing about the value of the company. The effect occurs mostly between the announcement and the actual inclusion. In the long run membership acts as a mild support, because the paper sits permanently in many portfolios.

The platform as a price factor for others

One particularity of this case deserves mention. Individual shares are regularly discussed on Reddit, and their prices then swing sharply.

A post in the WallStreetBets forum drove the share of the burger chain Wendys up as much as 42 percent on 24 June and triggered a trading halt on the New York exchange. Volume that day reached more than 200 million shares, more than twenty times the usual level.

Now the platform on which such moves arise is itself a member of the most important American share index.

Frequently asked questions

Why does the share fall despite strong growth

Investors fear that answer systems using artificial intelligence will answer questions directly and that fewer people will therefore reach the platform. Without a visit there is no advertisement, and without an advertisement no revenue. Around 95 percent of revenue comes from advertising.

Why could the same technology also help

The stock of discussions written by people counts as particularly valuable for training language models. From that arises the possibility of concluding licence agreements with the operators of such models and monetising the data.

Why does an index inclusion move the price

Numerous funds replicate indices exactly and have to buy an included company regardless of their own view. Demand arises that says nothing about the value of the company. The effect occurs mostly between the announcement and the actual inclusion.

This analysis is for information only and is not investment advice.