Since Reddit went public in 2024, the social-media site has had a marriage of convenience with Google. It's time to renew the vows.
Google has paid a reported $60 million a year to train its artificial-intelligence models using conversations from Reddit's more than 100,000 communities. The pair are now locked in contract renewal talks that could make or break Reddit stock. The talks could also go a long way in determining the value of human content in the age of AI.
Investors are clearly skittish about it all. Reddit stock fell 8.3% in one day last week when The Wall Street Journal reported that the company had considered walking away from the negotiating table.
Reddit has plenty of leverage to get a better deal, even without walking away. As AI models advance, they require ever more human content to improve. On the flip side, those same AI models threaten to cannibalize the search traffic that drives viewers to Reddit's site and feeds its advertising engine, which generated $2.3 billion in revenue over the past four quarters.
That dynamic makes the negotiations with Alphabet-owned Google a crucial test for the company. For now, Wall Street is taking a wait-and-see approach. The stock is down 22% this year to a recent $178.44. Investors are keenly awaiting another financial update, due on Thursday, when Reddit reports second-quarter earnings.
The stock is likely to move on the numbers, but the big picture is around AI, not on any one quarter of results. If Reddit secures a better deal with Google in the coming months, the stock could soar. And there's good reason to think both companies need each other.
Reddit has long been one of the most searched terms on Google as people look to the site for human-generated answers to everyday questions. A few real examples: What's the best car for a new driver? Or, am I the a -- hole for thinking it's absurd my husband made only half the bed?
Reddit shares have soared 425% since the stock went public in March 2024 at $34 a share. But it has been a bumpier ride of late; the stock is down 34% from its all-time closing high of $270.71 last September.
The site's own usefulness became a double-edged sword after Google -- the internet's search giant -- launched AI Overviews on May 14, 2024, right after Reddit's initial public offering. The AI-powered overviews are automated responses to queries that appear at the top of Google's search page. While answers include source links, data show the overviews have decreased the need for people to visit independent websites. Barron's reported a year ago on the major shift that the launch of Google's Overviews was already having on the internet economy. The trend has accelerated since then.
The main impact on Reddit appears to be a slowdown in its user growth. While first-quarter daily active users increased 17% from the prior year to 126.8 million, that was down from 31% growth a year earlier.
Though Reddit remains the sixth-most-visited site in the world, per Semrush, investors worry what slowing user growth means for the future of advertising, which accounted for 94% of Reddit's revenue last year.
A Reddit spokesperson acknowledged that all publishers will be subjected to changing search trends, but said that improved product features would spur continued growth and engagement. Meanwhile, the company points out that advertising has grown at a faster clip than users.
After Reddit's first-quarter earnings report in April, CEO Steve Huffman called his site's content the "oil for the modern internet." The remark wasn't just a catchy slogan, but a potential signal to the world's largest AI companies: Our price is going up.
Wall Street estimates that Google pays Reddit around $60 million a year to scrape content from the site. It uses the data, in turn, to power the AI products that have seemingly siphoned search traffic away from Reddit.
OpenAI, which didn't respond to requests for comment, is thought to pay a similar or slightly higher amount.
The draw for AI labs is simple: Reddit is an ever-expanding repository of human knowledge, opinion, and interaction. It has built-in quality control since users can "upvote" or "downvote" posts and comments. Ask ChatGPT for a trip itinerary or a product recommendation, and the chatbot may well cite an anonymous "Redditor." The information could be wrong, but at least it's human-approved.
While the rest of the internet overflows with AI-generated content, that $60 million annual fee now looks like a friendly deal for Google, says Dan Salmon, an analyst at New Street Research.
"We very much think that there's still lots of value in real human information that Reddit has," Salmon tells Barron's.
The content-licensing agreements comprised about 6% of Reddit's total revenue in 2025, but that number could jump sharply next year as the deals come up for renewal. The companies have had ongoing talks throughout the partnership, a Reddit spokesperson said.
Several institutional investors and sell-side analysts say they expect Reddit to secure a larger deal. A best-case scenario would include Reddit getting a usage-based agreement that goes beyond a flat fee. Wells Fargo analyst Alec Brondolo forecasts that Reddit's renewed agreements with OpenAI and Google could come at a combined $550 million a year -- more than quadruple current levels.
Both Reddit and Google declined to comment on what they called private negotiations. But Google has been clear about its focus on AI above all else, both through executive commentary and its soaring budget for capital expenditures.
"Our AI investments are redefining what's possible across every part of our business," Sundar Pichai, the CEO of Alphabet, said on the company's earnings call last week.
On the other side of the negotiating table, Reddit has proven a willingness to protect the value of its data. The company sued AI start-up Anthropic in June 2025 for allegedly scraping Reddit's data to train its large language model, Claude.
"This case is about the two faces of Anthropic: the public face that attempts to ingratiate itself into the consumer's consciousness with claims of righteousness and respect for boundaries and the law, and the private face that ignores any rules that interfere with its attempts to further line its pockets," Reddit said in the lawsuit.
Anthropic declined to respond to a request for comment. An Anthropic spokesperson told Barron's in June 2025 that "we disagree with Reddit's claims and will defend ourselves vigorously."
Anthropic has already settled other data training cases tied to copyright infringement. On July 20, a federal judge approved a $1.5 billion deal in which Anthropic will pay thousands of authors approximately $3,000 each.
But Reddit's ongoing suit against Anthropic could be more significant because its argument centers around user agreement violations, not copyright laws. Kirk Sigmon, founding partner of KellDann Law PLLC, says it's an important distinction that could limit Anthropic's ability to claim "fair use" of Reddit data.
Sigmon believes the case will be settled before Anthropic's highly anticipated initial public offering.
Clearing up the Anthropic case and expanding the AI licensing contracts would go a long way toward boosting Reddit stock.
Analysts tracked by FactSet expect the company to record $177 million in non-advertising revenue in 2027 -- just 4% of total business -- but that's largely a shot in the dark given the closed-door nature of the negotiations.
Half Moon Capital, a small New York hedge fund with a stake in Reddit, has a $295 price target on Reddit shares -- some 60% above recent levels -- even without new AI licensing deals.
Reddit's U.S. revenue per user jumped more than 50% in 2025 as its ad technology improved, Half Moon wrote in an internal research note. And advertisers have caught on to the same thing AI labs have: People use Reddit for product recommendations, making the platform fertile ground for brands.
Others have made the licensing business a part of their thesis. Scott Greeder, managing partner at Broad Bay Capital Management, which owns Reddit stock, expects the contracts to get renewed this year at a higher number, giving shares a much-needed boost.
Success in the negotiations and in the courtroom could help Reddit stock in two ways: sentiment and earnings. Reddit shares trade at 28 times projected earnings over the next year, down from an 80-times multiple last year. New AI deals could restore some of that premium.
Perhaps more importantly, a big licensing deal would unlock hundreds of millions of dollars in new profit. Advertising will remain Reddit's bread and butter, but content licensing comes with wide margins and low costs as the business scales up.
"Scarce assets tend to become more valuable over time," a Reddit spokesperson told Barron's, "and authentic human conversation at scale is becoming increasingly rare."
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