From Decrypt · By Jose Antonio Lanz
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.
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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.
But the audience figures were less encouraging since Reddit reported 130.3 million daily active unique visitors, up 12% year over year but below the roughly 134 million analysts expected. In the U.S., the number actually fell 2% to 50.7 million, giving investors another reason to question whether the platform can maintain its growth.
Huffman delivered the warning during Thursday's earnings call, explaining that Google search referrals had fallen by more than one million on average every week during October, with the decline accelerating toward the end of the third quarter. If that pace continues, Reddit's total daily active users could fall by a low double-digit percentage in Q4 from the current base of around 130 million.
BitcoinBTC · USD$76,910−5.52%Oct 23Oct 25Oct 27Oct 29Oct 30$81.8k$80.1k$78.4k$76.7k24h HighHigh$80,76924h LowLow$76,339VolVol$2.6B→Buy Bitcoin with USDTPowered by JupiterPrice data by CoinGeckoCoinGeckoMore Bitcoin news and projections →Huffman pointed directly at Google's AI Overviews and AI Mode, features that generate answers and summaries directly inside search results. Rather than sending users to websites to find information, Google increasingly gives them what they are looking for on its own page, pushing traditional search links further down.