Reddit shares plummeted 30% on Friday following weak fourth-quarter sales guidance, marking the steepest daily decline since the company went public in 2024. The drop surpassed the previous record loss of 20.99% set on July 31, putting the stock on track for its worst day as a listed company.
In its latest earnings report, Reddit projected fourth-quarter sales between $1 billion and $1.03 billion, falling short of analyst expectations of $1.05 billion. The company reported third-quarter sales growth of 53% compared to a year earlier, which was slower than previous quarters, though Reddit beat Wall Street forecasts on both earnings and revenue in that quarter.
The weak guidance comes as Reddit faces headwinds from Google's AI Overview, which has affected how users discover the platform. In an interview with CNBC, Chief Executive Steve Huffman said search referral traffic from Google declined significantly during the quarter due to the rise of AI. Huffman emphasized Reddit's position as offering relatively unrestricted access without requiring login, stating that users would come to understand this shift as an evolution in how platforms operate.
Following the disappointing results, multiple analysts downgraded the stock. Citizens noted that the search traffic changes demonstrate risks in relying on Google referrals for traffic, and warned that mounting referral problems combined with uncertainty around user growth as the company shifts toward requiring login would place additional strain on efforts to increase revenue per user.
For investors and those considering positions in US technology stocks, the sharp selloff reflects concerns that Reddit's business model faces mounting pressure from changes in how search engines direct traffic to content platforms.