Reddit shares fall 29% on weak outlook and falling Google referrals

Reddit shares fell 29.22% on Friday, 30 October, their worst day since the 2024 IPO, after the company forecast fourth-quarter revenue below analyst expectations and reported falling search traffic.

Reddit said revenue for the third quarter rose 53% year on year to $895 million, and net income reached $283 million. Daily active uniques (DAUq) rose 12% to 130.3 million, and average revenue per unique rose 36% to $6.87, according to CNBC's report. Fourth-quarter revenue guidance of $1.00 billion to $1.03 billion fell short of the $1.05 billion analysts expected. User growth also trailed analysts' estimate of 133.7 million.

The previous record low came on 31 July, when shares fell 20.99%. GuruFocus earlier reported an 18% decline for the day. That figure has not been confirmed and differs from CNBC's 29.22%.

Chief executive Steve Huffman said search-referral traffic from Google fell meaningfully in the quarter because of AI. He said Google's AI Mode does not drive traffic to Reddit or, as far as he knows, to anyone else.

Reddit's letter said search referrals fell by more than 1 million a week on average in October, and the decline sped up late in the quarter. U.S. DAUq fell from 53.2 million to 50.7 million, driven by logged-out users, who fell from 30.1 million to 27.3 million. Logged-in users rose slightly, from 23.1 million to 23.4 million.

Analysts at Citizens said search changes highlight the problem with selling content to Google. They also said referral problems and login uncertainty add pressure on monetisation. Neither CNBC nor Search Engine Journal reported a response from Google.

Reddit will begin testing a logged-in-only experience in select markets outside the U.S. in Q4. The markets were not named. Logged-in and app users account for more than 80% of monetisation, and DAUq outside the U.S. grew 24% year on year. If the trend continues, total DAUq could fall in Q4 by a low-double-digit percentage from the 130 million base, according to Search Engine Journal.

Reddit says some version of the site will remain available before a hard login prompt, and shared links will keep working. Huffman said: "This is a test, but we are going to make this transition."