Reddit (NYSE: RDDT) shares plunged more than 23% to $100 in Friday’s premarket trading, approaching levels last seen in May 2025 after the social media company reported weaker-than-expected user growth.
Reddit also warned that total daily active users could fall by a low-double-digit percentage in the fourth quarter if search referrals continued declining at their October pace.
The selloff came despite stronger-than-expected third-quarter earnings. Reddit averaged 130.3 million daily active unique users (DAUq), up 12% year over year but below analysts’ expectations of approximately 134 million.
U.S. daily active users fell 2% to 50.7 million, their first year-over-year decline since Reddit’s 2024 initial public offering. International daily users increased 24% to 79.6 million.
CEO Steve Huffman said search referrals had been declining by more than one million per week on average during October, extending a downturn that accelerated late in the third quarter.
During Thursday’s earnings call, Huffman identified Google’s AI Overviews and AI Mode as possible major contributors to the decline. He said the features move traditional links lower in search results without generating comparable referral traffic. Reddit also believes its machine-translated content may be receiving lower search rankings, particularly outside the United States.
The company said the traffic decline primarily affected logged-out visitors and web users, although some of the weakness also reached returning app users.
Reddit plans to test a login-only experience in selected markets outside the United States during the fourth quarter. The company said it wants to assess the impact of requiring users to sign in before considering a wider rollout.
Huffman said logged-in and app users, who grew sequentially during the third quarter, account for more than 80% of Reddit’s monetization, making that audience central to the company’s efforts to reduce its dependence on search referrals.
Earnings Beat Overshadowed by Weaker Fourth-Quarter Outlook
Reddit reported third-quarter revenue of $895 million, up 53% from a year earlier and above the $878.4 million analyst consensus compiled by LSEG.
Advertising revenue rose 54% to $847 million, while diluted earnings increased 75% to $1.40 per share, above the $1.33 analyst estimate reported by StreetInsider. Net income climbed to $283 million from $163 million a year earlier.
However, Reddit forecast fourth-quarter revenue of $1 billion to $1.03 billion, below the approximately $1.05 billion expected by analysts.
The company also projected adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $480 million to $510 million, compared with the $512.2 million consensus estimate. Even the upper end of that range fell short of expectations.
Reddit Shares Approach May 2025 Price Levels
Friday’s premarket price brought Reddit shares close to the $99.14 intraday low recorded on May 27, 2025.
The stock had already declined for seven consecutive regular trading sessions through Thursday, losing approximately 16.7% from its October 20 closing price of $155.65 to $129.60. It was down about 43.6% year to date before Friday’s premarket selloff.
In tokenized trading, Reddit Tokenized bStocks (RDDTB) was quoted at $100.61, down 24% over the previous 24 hours, according to CoinMarketCap. The tokenized instrument trades separately from Reddit’s NYSE-listed shares.