Roblox and Reddit Stocks Drop Over 20% After Earnings Reports
On July 30, both Roblox (RBLX) and Reddit (RDDT) reported earnings after market close, leading to significant stock declines of over 20%. While both companies faced challenges in user growth and external pressures like Google AI Overviews affecting traffic, their financial health differs. Roblox's DAUs grew only slightly below expectations due to safety measures impacting engagement, while its bookings are expected to decline next quarter despite reentering the Russian market. Reddit reported strong revenue growth of 61% in Q2 and nearly tripled EPS to $1.25, with U.S. revenue up 56%. The company is reconsidering a costly data-sharing deal with Alphabet as it seeks better traffic direction from Google search referrals. Analysts suggest Reddit may be the stronger buy despite both stocks falling sharply. Roblox faces higher operational costs and legal challenges in youth safety regulations, which are affecting its gross margins (25.67%) and long-term profitability outlook.
