Reddit shares fall about 28% in trading as Google AI traffic concerns overshadow growth

Reddit’s 53% quarterly revenue growth was not enough to stop its shares falling about 28% during October 30 trading. The selloff followed results showing a shrinking U.S. audience and a revenue forecast below analysts’ expectations, as CEO Steve Huffman blamed Google’s AI search features for sending fewer visitors to Reddit.

Analysts mark down the outlook

Reddit forecast fourth-quarter revenue of $1 billion to $1.03 billion, below the $1.045 billion analyst consensus cited by TheStreet. The forecast followed third-quarter revenue of $895 million and diluted earnings of $1.40 per share, above the cited Wall Street estimate of $1.33.

JPMorgan cut its Reddit price target from $185 to $150, citing search-traffic headwinds, according to TheStreet’s account of TheFly’s reporting. Goldman Sachs lowered its target from $215 to $140, pointing to weaker search referrals and declining traffic from logged-out users.

Logged-out visitors account for the weakness

Reddit separates its audience into logged-in and logged-out users, with the latter often arriving through search. U.S. daily active uniques fell 1% from a year earlier: logged-out users declined 4%, while logged-in users increased 1%.

The quarter-to-quarter comparison was steeper. U.S. daily users fell 4.7% to 50.7 million, while logged-out users dropped 9%. Globally, however, daily active uniques rose 12% year over year to 130.3 million. U.S. revenue also increased 50% to $719 million.

Huffman said Google search referrals fell by more than 1 million a week in October, blaming AI Overviews and AI Mode. Reddit says demand for its platform has not changed; Google is simply sending fewer people there.

AI Mode does not drive traffic. Not for us, and not to anybody as far as I know. That's just a fundamental shift in how Google works.

Steve Huffman, Reddit CEO, quoted by The Decoder

His warning about other websites is his assessment, not an industry-wide traffic measurement.

A smaller reach, a more engaged audience

Reddit is testing login walls outside the United States to curb scraping and reduce its dependence on the open web, The Decoder reported. Huffman described the choice as accepting less reach in exchange for deeper engagement.

Chief operating officer Jen Wong said logged-in and app users account for 80% of monetization. That gives Reddit a financial reason to prioritize those users, even as search-driven visits weaken. Data-licensing talks with AI providers also continue, but further agreements remain uncertain, according to The Decoder.