NEW YORK — Reddit Inc. shares climbed 11 percent in extended trading Thursday after S&P Dow Jones Indices announced the social media platform will join the S&P 500 on Aug. 18, replacing AvalonBay Communities.
The inclusion triggers mandatory buying from passive fund managers, who must hold every index constituent to track the benchmark accurately.
Reddit becomes only the second pure-play social media company in the S&P 500. Meta Platforms is the other. Pinterest and Snap Inc. compete in digital advertising but carry smaller market capitalizations. Twitter, rebranded as X, was an S&P 500 component until Elon Musk took the company private in 2022.
Reddit reported second-quarter revenue of $805 million in late July, a 61 percent year-over-year increase and its eighth consecutive quarter of sales growth above 60 percent.
Despite those results, the stock fell after the report. Reddit disclosed that search referrals had shown volatility, raising concerns about the company's dependence on Google for user acquisition. Chief Executive Steve Huffman attributed the instability to Google's Gemini-powered AI Overviews, which surface direct answers inside search results and reduce click-throughs to external sites.
Slowing U.S. user growth compounds the concern. The S&P 500 inclusion brings passive inflows and added liquidity, but it does not resolve the structural question of how Reddit competes for traffic as AI continues to alter search behavior. That question remains the central risk to the company's ability to sustain high growth rates.
In a related index adjustment, Sun Communities will join the S&P MidCap 400, replacing Webster Financial Corp. Both changes take effect Aug. 18.
