Reddit record drop: shares sink 29% on weak guide and login plan

Beating estimates was not nearly enough. The Reddit record drop on Friday took the stock down 29.22%, its steepest one-day fall since the 2024 listing, as investors focused on a weak holiday-quarter outlook and a warning that Google's AI answers are draining traffic.

What happened

Reddit guided fourth-quarter sales to between $1 billion and $1.03 billion, short of the roughly $1.05 billion analysts expected. Third-quarter revenue grew 53% from a year earlier and beat forecasts, but that ended a run of eight straight quarters above 60% growth.

User numbers disappointed. Daily active uniques rose 12% to 130.3 million, below the 133.7 million consensus, and U.S. daily users fell 2% to 50.7 million versus expectations of 53.5 million. Average revenue per user of $6.87 did beat the $6.50 estimate.

Chief executive Steve Huffman told CNBC that Google search referrals fell meaningfully during the quarter as a result of AI Mode and AI Overviews, and said the trend will continue into the fourth quarter. The previous worst session was July 31, when the shares fell 20.99%.

Why it matters

Reddit also plans a test in which visitors must sign in before reading content, starting in select markets outside the U.S. this quarter. Logged-in users are more active and easier to monetize, but the move breaks with the open-browsing model that made the site a staple of search results. Huffman admitted he had held that line personally and called the shift a sign of the times.

Several analysts cut ratings. Citizens argued that search changes expose the risk of selling content to Google, while uncertainty around user growth during a login switch adds pressure on monetization. Yahoo Finance noted the stock is down almost 60% this year.

The pattern is familiar from the week's other AI-disruption casualties, including the ServiceNow worst day, and from the ad-market worries that followed the Alphabet earnings miss.

The stakes are high because traffic is the product. Reddit sells advertising against attention, and its content has also become valuable training data for AI models. When Google answers questions directly, fewer people click through, and the users who do arrive are less likely to be logged in. That is why the Reddit record drop reflects more than one soft quarter; it is a vote on whether the company can turn casual searchers into habitual app users before the referral stream thins further.

What's next

The next markers are early login-test results and any new AI data-licensing deals, which investors had hoped for in July. CNBC's report on the selloff has Huffman's full comments.

If logged-in growth offsets lost search visitors, the Reddit record drop may look like an overreaction; if not, the stock has to be repriced as a slower-growth ad business.

Peers felt it too: Pinterest slipped about 3% and Roblox about 17% after their own reports, a sign that consumer platforms face a tougher bar this season.