shares of reddit Shares plunged 29.22% on Friday, the worst decline since going public in 2024, after the company predicted weak fourth-quarter sales in its latest earnings report.
The previous record low was recorded on July 31st, when the stock price fell 20.99%.
The social media company on Thursday expected fourth-quarter revenue of $1 billion to $1.03 billion, below analysts’ expectations of $1.05 billion. Reddit reported third-quarter sales growth of 53% year-over-year, slower than the previous quarter, but beating Wall Street expectations for both revenue and revenue.
The report comes as the company sees a shift in search referral traffic due to the rise of Google’s AI Overview. Reddit CEO Steve Huffman said in an interview with CNBC: google AI was responsible for “significant declines this quarter.”
Reddit announced Thursday that it plans to test requiring users to log in to access content. This is a dramatic change from sites where community-based discussion content has become synonymous with the open Internet. Huffman said Google’s move to show AI summaries in search results coincided with this change and was intended to increase the number of logged-in users who are more active on the platform, which in turn helps the company’s advertising business.
“Reddit is basically the last platform that offers free logout access, and that’s largely because of me. I’ve continued to hold that line,” Huffman said. “I think users will probably experience the same understanding that I did, which is that this is a sign of the times. This is an evolution of how these platforms work.”
Several analysts downgraded the stock after Reddit’s disappointing results, with Citizens noting that “changes in search highlight problems with selling content to Google” and that uncertainty around user growth due to switching login requirements “puts additional pressure on user monetization” as referral issues worsen.
—CNBC’s Jonathan Vanian contributed to this report.
