Reddit Shares Plunge 29% in Record Drop on Weak Q4 Outlook and AI Traffic Shift
Reddit shares plunged 29.22% on Wall Street following a weak Q4 revenue forecast and declining referral traffic driven by Google's AI search features, dragging the Nasdaq down.
Reddit shares plummeted 29.22% on Wall Street, marking the steepest single-day decline since the company's initial public offering in 2024. The sharp drop followed a disappointing fourth-quarter revenue forecast issued in its latest earnings report.
The social media platform projects Q4 sales between $1.00 billion and $1.03 billion, falling short of Wall Street's consensus estimate of $1.05 billion. While third-quarter revenue grew 53% year-over-year—outpacing Wall Street expectations for both earnings and revenue—the growth rate represented a slowdown compared to previous quarters.
Impact of AI Search Changes
The financial results arrive amid a broader shift in referral traffic from search engines, driven by the rollout of Google's AI Overview feature. In an interview with CNBC, Reddit CEO Steve Huffman acknowledged that referral traffic from Google declined significantly during the quarter due to artificial intelligence integration.
To counter these headwinds, Reddit announced plans to mandate user logins for viewing content. Huffman noted that the platform is currently the last major site offering completely open access to unauthenticated visitors.
Market-Wide Tech Selloff
Reddit's slump contributed to a broader technology sector selloff, which dragged the Nasdaq down by 2.9%. The downturn marked the index's worst trading session since March 2025 and concluded its worst monthly performance in over a year.
Several financial institutions downgraded Reddit stock following the earnings release. Analysts at Citizens pointed out that shifting search dynamics highlight complications in content licensing agreements, while increasing uncertainty regarding user growth as the platform implements mandatory authentication.
