Actions of Reddit crater 29.22% on Friday, the worst decline since it became a public company in 2024, after the company forecast weak fourth-quarter sales in its latest earnings report.
The previous record was reached on July 31, when the stock fell 20.99%.
The social media company on Thursday forecast fourth-quarter revenue of between $1 billion and $1.03 billion, below analysts’ estimates of $1.05 billion. Reddit reported 53% sales growth in the third quarter a year ago, lower than previous quarters, but beating Wall Street expectations for profits and revenue.
The report comes as the company saw a shift in its search SEO traffic with the rise of Google’s AI preview. In an interview with CNBC, Reddit CEO Steve Huffman said that search SEO traffic from Google “decreased significantly during this quarter” due to AI.
Reddit announced plans Thursday to test requiring users to log in to access content, a stark departure from a site whose community discussion content has become synonymous with the open Internet. Google’s move toward integrating AI previews into search results coincided with this shift, intended to help increase the number of logged-in users who are more active on the platform, which in turn helps the company’s advertising business, according to Huffman.
“Reddit is the last platform to provide virtually unlimited offline access, and that’s largely because of me. I’ve held that line,” Huffman said. “I think users will probably have the same understanding as I do, which is that this is a sign of the times. It’s an evolution of how these platforms work.”
Several analysts downgraded the stock following Reddit’s disappointing results, with Citizens noting that “search changes highlight problem with selling content to Google” and that as SEO issues worsen, uncertainty around user growth amid changing login requirements “puts more pressure on user monetization.”
— CNBC’s Jonathan Vanian contributed to this report.
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