Reddit shares extend record intraday decline to 29%

Reddit shares are down almost 30%, as third-quarter user numbers missed and the outlook got worse.

Daily active users rose 12% to 130.3 million, short of the 133.53 million Bloomberg consensus, but the real damage was in the US, where users fell 1.7% to 50.7 million against expectations of 53.5 million.That matters because Reddit earns far more per user in the US than abroad, so slower international growth (up 24%) doesn’t make up for it.

Management also said search referral traffic got worse in October and that daily active users could fall by a low double-digit percentage in the fourth quarter if trends hold. To make matters worse, two analysts cut their ratings after the report: KeyBanc moved to sector weight and Citizens moved to market perform.

The underlying problem is Google: For years, Google search sent a steady stream of people to Reddit threads. Now AI Overviews and AI Mode answer questions directly, and the CEO says they don’t send traffic to Reddit or anyone else, even though Google is still crawling the site as hard as ever. Reddit’s response is to stop depending on that traffic: it is shifting marketing toward app installs and plans to test a logged-in-only experience internationally in the fourth quarter. Bank of America’s Justin Post thinks this could eventually build a higher-quality, higher-monetizing user base, but expects the switch to take several quarters and hurt headline traffic along the way. Bloomberg Intelligence’s Mandeep Singh warned that requiring logins could also cut referrals from search engines and AI platforms. So investors are looking at a likely user decline now in exchange for a business that may be stronger later, and the stock is being priced on the first part.