Reddit Traffic Warning Sends Shares Tumbling After Earnings

Reddit shares fell 18% in extended trading on Thursday after the company beat third-quarter revenue estimates but warned that search referrals are falling fast enough to cut daily visitors in the fourth quarter. The warning put Reddit traffic at the centre of an otherwise strong set of results, because the visitors arriving from search engines are shrinking week by week.

Revenue rose 53% to $895 million in the quarter ended 30 September, according to Reddit's results release. Advertising revenue rose 54% to $847 million, while net income reached $283 million and diluted earnings per share reached $1.40. The total revenue figure beat the $878.4 million average estimate compiled by LSEG, according to Reuters.

Daily active uniques rose 12% to 130.3 million worldwide. Weekly active uniques rose 16% to 515.2 million. In the United States, daily active uniques fell 2% to 50.7 million, the first such decline since the company listed in 2024, according to Reuters. International growth offset part of that fall, with daily active uniques outside the United States up 24%.

A strong quarter, a sharp warning

Reddit said in a shareholder letter that search referral traffic fell meaningfully during the quarter and that the decline accelerated later in the quarter. During October, search traffic dropped by more than one million referrals on average per week. If that pace continues, daily active uniques could fall by a low double-digit percentage in the fourth quarter, the company said.

Chief executive Steve Huffman blamed Google's shift to AI Mode and AI Overviews on the earnings call, saying the AI mode "does not drive traffic". AI-powered search answers questions directly on the results page, so fewer people need to click through to the site that supplied the answer. That change cuts traffic to publishers and social platforms alike, and it threatens the user growth that supports advertising revenue.

The shareholder letter described web search as evolving from a gateway to the web into an AI-powered destination in its own right. Reddit licenses its corpus of user discussions to Google and OpenAI, and Huffman said in a statement that commercial deals come with guardrails that protect users and the business. The company has also sued Anthropic and Perplexity AI over data scraping, according to Reuters.

A login test and a weaker outlook

Reddit plans to test a mostly logged-in experience in select markets outside the United States in the fourth quarter, to assess its impact before any wider rollout. The change would end two decades of allowing anyone to browse most content without an account. Logged-in and app users already account for over 80% of monetization, according to the company, so Reddit is betting that signed-in visitors matter more than casual arrivals from search.

Luke Stillman, a managing director at research firm Madison and Wall, said requiring users to log in "creates another barrier to engagement, particularly for casual users". That tension sits at the heart of the plan: a login wall could protect content from scraping and push visitors toward the app, but it could also turn away people who arrive casually and never return.

Reddit's business depends on people returning to discussion forums rather than landing briefly from a search result and leaving. Advertisers pay to reach an audience that posts and comments, and that audience is easier to serve when visitors are signed in and using the app. A shift toward logged-in browsing could therefore strengthen the part of the business that already drives most revenue, even if headline visitor counts fall. The risk is that casual readers who do not sign up simply stop arriving, shrinking the pool from which future signed-in users are drawn.

Related coverage on this site examined Alphabet's AI spending selloff and Amazon's cash-flow swing after its own earnings.

For the fourth quarter, Reddit forecast revenue of $1.00 billion to $1.03 billion and adjusted earnings before interest, taxes, depreciation and amortisation of $480 million to $510 million, against an estimate of $512.2 million. Chief financial officer Drew Vollero said Reddit crossed $3 billion in trailing twelve-month revenue in the quarter, with a stated internal goal of $5 billion in revenue. Shares had closed Thursday at $129.60, down 3.8% in regular trading, before falling further in premarket trading on Friday, when the decline reached 21.1%, according to Invezz.