Reddit shares fell 29.22% on Friday, the stock's worst day since its 2024 public debut, after the company forecast weak fourth-quarter sales. Management also said search referral traffic from Google dropped, and it plans to test requiring users to log in.
Reddit shares cratered 29.22% on Friday, the worst drop since the company went public in 2024. The selloff followed a fourth-quarter sales forecast that came in below analyst estimates.
Weak guidance overshadows a beat
On Thursday, the company projected fourth-quarter sales between $1 billion and $1.03 billion, while analysts had estimated $1.05 billion. Q3 sales grew 53% from a year earlier, slower than in previous quarters, though the company beat Wall Street expectations on both earnings and revenue.
The previous record one-day drop came on July 31, when the stock fell 20.99%.
Google's AI search hits referral traffic
CEO Steve Huffman told CNBC that search-referral traffic from Google went down meaningfully in the quarter because of AI. The report comes as Google pushes AI Overviews in search results.
Separately, Reddit plans to test requiring users to log in to access content. According to Huffman, the change is intended to increase the number of logged-in users, who are more active and help the advertising business. Huffman added: "Reddit is the last platform to provide basically unfettered logged-out access".
Analysts downgrade the stock
Multiple analysts downgraded the stock after the results. Citizens said that as referral problems worsen, uncertainty around user growth amid the login switch adds pressure on user monetization.
Shares closed at $91.73, down 60% since the start of the year, according to MarketWatch. The stock was the S&P 500's worst performer on Friday and has fallen for 10 of the past 11 days.
Sources: CNBC, MarketWatch
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