Reddit experienced a sharp decline in its stock price on Friday, with shares dropping 29.22% in what constituted the steepest single-day loss since the company went public in 2024. The previous record decline had occurred on July 31, when the stock fell 20.99%.
The sell-off followed the company’s fourth-quarter guidance released on Thursday, in which Reddit projected sales between $1 billion and $1.03 billion. This projection fell below analyst expectations of $1.05 billion. While the company reported third-quarter sales growth of 53% compared to the prior year and beat Wall Street expectations for both earnings and revenue, the forward-looking guidance disappointed investors.
Reddit CEO Steve Huffman attributed some of the company’s challenges to changing search dynamics, specifically citing the impact of Google’s AI Overview feature. In comments to CNBC, Huffman noted that search-referral traffic from Google had declined “down meaningfully in this quarter” due to the implementation of AI technology. In response to these pressures, Reddit announced plans to test a system requiring users to log in to access content, representing a significant departure from the platform’s traditional model of open, logged-out access.
The company framed the login requirement initiative as a strategic move to increase active logged-in users and strengthen its advertising business. Huffman explained that the change reflected evolving industry practices, stating that Reddit had maintained unfettered logged-out access largely due to his preference but characterized the shift as inevitable.
Multiple analysts responded to the earnings results with downgrade recommendations. One analyst firm noted that the search-related traffic challenges highlighted risks associated with relying on content sales to Google, and expressed concern that mounting referral problems combined with uncertainty about user growth following the login requirement shift could intensify pressure on the company’s ability to monetize its user base.
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