

Reddit reported Q2 revenue of $805 million, up 61% from a year earlier, as a sequential dip in US daily users stoked growth concerns. "We're not building for drive-by traffic. We're building a daily destination," Chief Executive Officer Steve Huffman said on the call. Advertising revenue rose 64% to $762 million, while adjusted EBITDA reached $343 million, a 43% margin that grew 106% year over year. Net income more than doubled to $253 million, or $1.25 a diluted share, from $89 million a year earlier. Operating cash flow hit $262 million, lifting the trailing 12-month total above $1 billion for the first time. The stock fell after hours as US daily active users slipped sequentially, even as weekly actives crossed 500 million globally. Management attributed the decline to choppy search referrals, particularly from AI overviews, which offset product-driven gains. New app user retention rose 50% year over year, Huffman said, as the company converts web users into higher-value app users. ## Ad business broadens as automation scales Advertising revenue growth was broad-based, with international revenue up 84% to $167 million and US revenue up 56% to $638 million. Active advertisers grew more than 70% year over year, and revenue from the automated Reddit Max suite rose over 150% sequentially from the first quarter. Dynamic product ads and app installs each more than doubled revenue year over year, while the scale channel serving mid-market and small businesses doubled. Global average revenue per user rose 36% to $6.18, with US ARPU up 51% to $11.85. Gross margin expanded 50 basis points to 91.3% as hosting efficiency offset higher AI inference costs. The company repurchased $235 million of stock, or 1.5 million shares at an average price of $157.57, leaving $760 million on its authorization. ## Guidance points to slower growth For the third quarter, Reddit guided revenue of $860 million to $870 million, implying 47% to 49% growth at the midpoint, and adjusted EBITDA of $385 million to $395 million, a 45% margin. The company lowered its full-year stock-based compensation forecast to the low-to-mid teens as a percentage of revenue from the high teens. Management said visibility into search referral traffic remains low and that AI overviews have yet to deliver the positive impact of traditional search links. Huffman said the company is exploring new video formats, including "spoken Reddit" for listening to posts, and plans to expand Reddit Max as the primary onboarding for small businesses. The guidance signals that Reddit expects its advertising engine to keep compounding even as user growth faces external search headwinds. Investors will watch the Q3 earnings call for whether product-driven retention gains can offset further referral volatility and whether data licensing renewals with Google and OpenAI, which Huffman called "not binary," are resolved. This article is for informational purposes only and does not constitute investment advice.

Roblox reported Q2 revenue of $1.5 billion, up 36%, but bookings growth slowed to 8% as algorithm changes cut under-13 spending. "We remain steadfast in our goal to capture 10% of the global gaming market," CEO David Baszucki said, while conceding the algorithmic shift "impacted monetization, primarily in the U.S. under-13 cohort." Bookings of $1.6 billion landed at the low end of guidance and missed internal targets. Daily active users rose 10% to 123 million, hours grew 5% to 29 billion, and free cash flow jumped 66% to $294 million. Net loss narrowed to $185 million from $280 million a year earlier, while adjusted EBITDA reached $152 million, up from $18 million. For Q3, Roblox forecasts bookings of $1.58 billion to $1.65 billion, a 14%-18% year-over-year decline against the prior-year quarter's $1.93 billion, and withdrew full-year guidance. Shares fell 13.83% after hours to $41.94. CFO Naveen Chopra attributed the shortfall to a greater-than-expected shift in engagement away from high-monetizing viral games that drove 2025 growth toward newer, evergreen experiences with lower hourly spending. The company also changed its discovery algorithm months ago to optimize for long-term retention rather than near-term revenue, squeezing out titles with aggressive monetization loops. The impact concentrated in the under-13 cohort, with bookings per hour declining year-over-year even as total hours grew. International markets offered a counterweight. Japan daily active users surged 67% and India 64%, while Russia was reinstated late in the quarter. Age-check penetration reached 57% globally, with the U.S. and U.K. at 70%. US & Canada bookings grew just 1% to $843 million, while Rest of World rose 31%. Chopra said about half of Q3 margin compression stems from AI investments in model training for Build, Moments, and Roblox Reality, with the other half from fixed-cost deleveraging on lower bookings. He declined to say whether 2026 bookings would exceed 2025, citing "increasing variability and continued updates to our platform." The guidance signals management expects monetization weakness to persist through the current quarter. Investors will watch the Q3 earnings call for signs that the retention benefits of the algorithm shift have begun to offset the near-term bookings hit. This article is for informational purposes only and does not constitute investment advice.

**A correct bet on AI infrastructure was not enough to survive a margin call — leverage, not conviction, decided the fund's fate.** Situational Awareness, the hedge fund run by former OpenAI researcher Leopold Aschenbrenner, lost 67% in July after nearly 4x leverage collided with an AI stock rout, forcing a $16 billion sale to Citadel. "We let you down this month," Aschenbrenner wrote in a letter to investors reviewed by The Wall Street Journal, taking full responsibility for the drawdown and vowing to "learn the necessary lessons" from the experience. The fund, launched in late 2024 with less than $1 billion, swelled to more than $20 billion in under two years after returning roughly 439% in the first half of 2026. Its top first-quarter holdings — Nebius Group, Sandisk, Micron and CoreWeave — each fell more than 35% in July, while shorted software names like Adobe rebounded, squeezing both sides of the book. The fund used money borrowed from prime brokers including Goldman Sachs, JPMorgan, Bank of America and Citigroup to enlarge its positions. The episode shows how a correct long-term thesis can collapse under short-term liquidity pressure. The fund retained roughly $10 billion in assets, including about $5 billion in Anthropic equity, and Aschenbrenner has pledged to remove all leverage. Whether the AI infrastructure trade resumes depends on whether other levered funds face similar margin pressure. ## From 439% gain to forced sale in four weeks The collapse began with a market-wide reassessment of AI capital expenditure payback periods. As investors questioned the returns on debt-funded data-center construction, AI hardware and infrastructure stocks saw concentrated selling in July. Asian names such as SK Hynix weakened sharply, while the software stocks the fund shorted rebounded, creating a pincer move against both long and short positions. More critical was the leverage. The fund borrowed from Wall Street banks to enlarge positions, amplifying gains while AI stocks rose but reducing the collateral supporting those loans when they fell. As losses mounted, margin calls came in rapid succession, forcing the fund to either raise capital quickly or sell assets under duress. Around July 30, the fund agreed within 24 hours to sell the bulk of its roughly $16 billion public stock portfolio to Citadel at a discount of more than 10 percent. Prime brokers including Goldman Sachs, JPMorgan, Bank of America and Citigroup helped arrange the transaction, which the Financial Times described as one of the largest rushed stock transactions in Wall Street history. The fund also scrapped a planned $3.5 billion sale of Anthropic equity to a consortium led by Greenoaks and Sequoia Capital, according to people familiar with the matter. ## Survival, not being right, is the moat The core lesson is not that Aschenbrenner's long-term thesis is wrong. Microsoft Azure's continued growth, persistent supply-demand tightness for Nvidia's high-end chips and AMD's repeated upward revisions of AI server market forecasts all point to a macro demand curve for AI infrastructure that is still sloping upward. The real risk was never about direction but about the alignment of leverage, position concentration and entry timing. History offers precedents: Long-Term Capital Management, staffed by Nobel laureates, imploded in 1998 during the Russian debt crisis under extreme leverage, while Peter Thiel's Clarium Capital made a correct but premature bet on oil prices that proved unsustainable. Business Insider summarized the failure precisely: "Even if you can accurately identify the biggest fundamental shift of a generation... once you add sufficient leverage and conviction, the market no longer judges whether your ideas are smart — it judges whether you can survive when liquidity dries up." The fund's rapid expansion from a small operation to tens of billions of dollars in assets massively amplified operational difficulty. Highly concentrated public positions stacked on high leverage left almost no room to maneuver when faced with the dual shock of sudden Asian market volatility and a global selloff in AI stocks. Large-scale redemption pressure combined with instantaneous liquidity evaporation forced the fund to liquidate passively at the worst possible moment. For the broader market, the AI narrative remains compelling, but leverage is a double-edged sword. Global hedge funds suffered their largest monthly drawdown on record in July, while Asia-focused fundamental long-short funds lost an average of 18.6 percent through July 28, according to Reuters. If other levered funds face similar margin pressure, the unwinding could inject further volatility into the Nasdaq and S&P 500 in coming weeks. This article is for informational purposes only and does not constitute investment advice.