Reddit Stock Plunges 30% as Google's AI Search Hits Traffic and User Growth

In brief

• Reddit shares plunged 30.44% to $90.15 on Friday, extending their weekly decline to 44%.
• CEO Steve Huffman said Google search referrals fell by more than 1 million per week in October and warned daily active users could decline by a low double-digit percentage in Q4 if the trend continues.
• Reddit forecast fourth-quarter revenue of $1 billion to $1.03 billion, below the roughly $1.05 billion analysts expected, despite reporting 53% revenue growth in Q3.

Reddit shares plunged 30.44% to $90.15 on Friday after CEO Steve Huffman warned that Google's AI-powered search features are cutting referral traffic and could shrink the platform's user base.

The selloff came after the company reported strong third-quarter results but issued a weaker-than-expected revenue forecast for the current quarter.

Reddit built much of its business around people discovering its discussions through Google searches, and those visitors are increasingly finding answers without ever clicking through to the platform. That puts pressure on the advertising business that has helped turn Reddit into one of the internet's fastest-growing publicly traded companies.

Reddit's third-quarter numbers initially looked healthy. Revenue climbed 53% year over year to $895 million, advertising revenue increased 54% to $847 million, and net income reached $283 million. Diluted earnings per share, which measure company profit attributable to each share while accounting for potential dilution, came in at $1.40, up 75% from a year earlier and above the $1.33 analyst consensus.