Reddit experienced a dramatic stock decline on Friday, with shares falling 29.22% to mark the company’s worst trading day since going public in 2024. The previous record loss occurred on July 31, when the stock dropped 20.99%.
The selloff followed Reddit’s earnings report released Thursday, which included fourth-quarter sales projections between $1 billion and $1.03 billion. This guidance fell short of Wall Street analyst expectations of $1.05 billion. While the company reported third-quarter sales growth of 53% year-over-year, the rate of expansion had slowed compared to earlier periods. Reddit did manage to beat analyst expectations on both earnings and revenue for the most recent quarter.
A significant factor in the outlook was declining search referral traffic stemming from changes in Google’s search approach. Reddit CEO Steve Huffman indicated in an interview that Google-referred traffic decreased substantially during the quarter due to the deployment of artificial intelligence overview features in search results. To address this challenge, Reddit announced plans to implement a login requirement for users to access content on the platform.
The shift represents a major change for a platform historically known for open, logged-out access to its community discussions. Huffman stated that the company had maintained this open approach intentionally but viewed the login requirement as necessary adaptation. He characterized the change as reflective of evolving industry standards and suggested users would come to accept the requirement. The strategy aims to increase the number of active logged-in users, which would strengthen the company’s advertising business.
Multiple stock analysts downgraded Reddit following the earnings announcement, with Citizens highlighting concerns that the company’s reliance on search referral traffic represented a structural vulnerability. The analyst noted that search changes underscored risks in depending on Google for content referrals, while growing uncertainty about user growth amid the pending login requirement change increased pressure on how effectively the company could monetize its user base.
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