Reddit Shares Tumble 29.22% on Weak Revenue Forecast, User Outlook
Reddit shares fell 29.22% on Friday after the company warned that search referral traffic weakened in the third quarter and forecast fourth-quarter revenue…
Reddit shares plunge 30% on Friday, October 30, after the company said search referral traffic weakened meaningfully in the third quarter and projected fourth-quarter revenue below analysts’ estimates. The stock fell 29.22%, its worst day since Reddit went public in 2024.
The warning puts pressure on a business that relies on search engines to bring people to its discussions. Reddit said the decline accelerated later in the quarter, while its forecast also pointed to slower user growth.
Why did Reddit shares fall?
Investors reacted to the outlook, not a weak quarter on its own. Reddit reported revenue of $895 million for the July-to-September quarter, up 53% from a year earlier and above analysts’ expectations.
Earnings per share rose to $1.40 from 80 cents. Yet the company forecast fourth-quarter revenue between $1 billion and $1.03 billion, below analysts’ consensus estimate of $1.05 billion.
Reddit also said daily user levels fell 2% in the third quarter. The company warned that they could decline by a low-double-digit percentage in the fourth quarter from a base of 130 million.
That combination left investors weighing strong reported growth against the possibility that fewer people will arrive through search. The drop was steeper than the previous record low cited in market coverage: a 20.99% fall on July 31.
Search referrals and Reddit’s response
Reddit said search referrals were down meaningfully in the third quarter, with the decline speeding up toward the end of the period. The company’s shareholder letter said the biggest effect fell on logged-out visitors and web traffic, though some of it also reached logged-in users and app traffic.
Search referrals matter because they bring visitors back to Reddit. A slowdown could therefore affect how many people encounter its communities and how much activity the platform can turn into advertising revenue.
Chief Executive Steve Huffman said Reddit plans to test requiring users to log in to access content in selected markets outside the United States during the fourth quarter. The company has presented the move as a way to increase logged-in users, who are more active on the platform and support its advertising business.
“This is a test, but we are going to make this transition,” Huffman said.
The planned test marks a change for a platform whose discussion pages have been widely accessible without an account. Huffman described Reddit as the last platform to offer largely unrestricted access to logged-out visitors and said the approach was changing.
The shift comes as search products increasingly provide AI-generated answers. Reddit’s shareholder letter argued that AI search serves a different purpose from community discussion, saying it does not meet people’s need for connection and belonging or provide the same context and nuance.
For users, a login requirement could mean a new step before viewing content in markets included in the test. For Reddit, the company is trying to respond to weaker search traffic while encouraging more visitors to use accounts. The test is planned for the fourth quarter in select markets outside the United States.
Despite the share decline, quarterly revenue rose 53% to $895 million.
