Reddit released third-quarter earnings results that exceeded analyst expectations on revenue and earnings per share, though the company’s stock declined sharply following the announcement. The platform’s shares fell over 15% after management revealed weak forward guidance and disclosed plans to implement a mandatory login requirement for all users accessing the service.
The company attributed the business challenges to a significant decline in search referral traffic from Google, which CEO Steve Huffman described as dropping substantially during the quarter. Huffman cited Google’s shift toward artificial intelligence-powered search overviews as the primary driver of reduced traffic to Reddit. He characterized this as a fundamental change in how Google operates, contrasting it with previous algorithm updates that were temporary in nature. The company plans to begin testing the login requirement outside the United States during the fourth quarter, though specific implementation timing was not provided.
Reddit reported daily active uniques reached 130.3 million in the third quarter, representing 12% year-over-year growth but falling short of Wall Street estimates of 133.7 million. U.S.-specific daily active uniques declined 2% year-over-year to 50.7 million, also below analyst projections. Third-quarter revenue grew 53% year-over-year, marking a deceleration from the prior eight quarters which each exceeded 60% growth. The company guided fourth-quarter sales between $1 billion and $1.03 billion, below consensus estimates of $1.05 billion.
Average revenue per user reached $6.87, surpassing analyst expectations of $6.50. Reddit’s “other revenue” segment, which includes data licensing to companies such as OpenAI and Google, increased 35% year-over-year to $48 million. Management indicated it remains in negotiations with Google regarding its data-licensing agreement and will only proceed with deals deemed strategically beneficial.
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