User and Traffic Question Marks Re-Emerge

Research evidence excerpt

User and Traffic Question Marks Re-Emerge

e translated

Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare

content) and limited CTR conversion in AI Overviews is weighing on referral traffic. framework

** = Based on consensus methodology

We believe these traffic headwinds worsened through 2Q and visibility in the § = Consensus data is provided by Refinitiv Estimates

e = Morgan Stanley Research estimates

channel continues to be low heading into 3Q. The good news is RDDT is making Quarterly EPS ($)

progress on its core product to drive more user growth...which has improved its app 2026e 2026e 2027e 2027e

Quarter 2025 Prior Current Prior Current

users and driven higher app user retention (with the latter up 50% y/y). But these Q1 0.13 - 1.01 - 1.13

changes for now are not enough to offset headwinds from GOOGL changes/ the Q2 0.45 - 0.90 - 1.33

Q3 0.80 - 1.10 - 1.57

rollout of AI Overviews….given that we estimate GOOGL comprises ~40-50% of Q4 1.24 - 1.32 - 1.89

inbound traffic to RDDT's platform. e = Morgan Stanley Research estimates

Thoughts on the Stock: Our model is under review as we assess the trajectory for

RDDT user growth, which we view as contingent on traffic from search as well as

improvements to the core (better content refresh, smoother onboarding flow, etc.).

RDDT's valuation hasn't been demanding for some time, and now trades at ~21x our

previously published '28 EPS, implying a ~60% discount to peers on a growth

adjusted basis. That said, we will continue to monitor how the stock trades as we

analyze traffic trends. We remain Overweight but tactically expect the stock to be

pressured due to this uncertainty around GOOGL referral traffic impacting the long

term user platform viability. In order to meaningfully re-rate, we believe RDDT