Reddit Plunges 29% as Google AI Overviews Gut Referrals

Reddit shares fell 29.22% on Friday, their worst day since the company became public in 2024, after the social platform guided fourth-quarter revenue to $1.00 billion to $1.03 billion, below Wall Street's roughly $1.05 billion consensus, and warned that daily active unique users could decline by a low-double-digit percentage from a current base of 130.3 million. CNBC reported the drop as the steepest single-day percentage loss in the company's short public history.

The quarter itself beat the Street. Revenue rose 53% year over year to $895 million, net income reached $283 million, and diluted earnings per share of $1.40 topped a $1.33 consensus. None of that held the stock. CEO Steve Huffman told analysts that search-referral traffic from Google 'was down meaningfully in Q3, with the decline accelerating later in the quarter,' and that in October alone, AI Overviews cut Reddit's referrals by more than one million visits per week.

'AI Mode does not drive traffic, not for us and not for anybody, as far as I know,' Huffman said on the call.

Reddit's response is to pull the drawbridge up. Starting in Q4, the company will test a logged-in-only experience in select markets outside the United States, a shift the company says protects its content from AI crawlers and strengthens first-party ad targeting. Logged-in users already account for more than 80% of Reddit's monetization.

The sell side moved quickly. Citizens cut Reddit to Market Perform from Market Outperform, writing that 'search changes highlight the problem with selling content to Google' and that mounting uncertainty around user growth as the login requirement rolls out 'puts more pressure on user monetization.' Reddit also guided Q4 adjusted EBITDA to $480 million to $510 million.