- Reddit beat but guided low. EPS was $1.40 versus $1.35 expected and revenue was $895 million versus $878 million, but fourth-quarter sales guidance of $1 billion to $1.03 billion trailed the $1.05 billion estimate, and the stock fell about 18% after hours.
- Google’s AI is hurting traffic. CEO Steve Huffman said search referral traffic went “down meaningfully in this quarter” because of Google’s “shift to AI mode and AI overviews,” and he expects the trend to continue in the fourth quarter.
- User growth disappointed. Daily active uniques rose 12% to 130.3 million, below the 133.7 million estimate, while US daily active uniques fell 2% to 50.7 million against expectations of 53.5 million.
- The open-web era is ending at Reddit. The company will begin testing a login requirement in the fourth quarter outside the US, a sharp change for a site long known for letting people browse without an account.
What Happened?
Reddit released third-quarter results Thursday. Revenue grew 53% year over year, ending a run of eight straight quarters of growth above 60%. Average revenue per user was $6.87, ahead of the $6.50 analysts expected, and “other revenue,” which includes data licensing to partners such as OpenAI and Google, jumped 35% to $48 million. Huffman said Reddit remains “in negotiations” with Google over its data-licensing deal.
Why It Matters?
Reddit is one of the clearest public-market tests of how AI search changes the economics of the open web. Its earlier growth was helped by a Google update that surfaced forum content, so a shift in Google’s product from “being a traffic driver to whatever’s going on now,” in Huffman’s words, hits user growth directly. Logged-in users are more valuable to advertisers, which is why Reddit is leaning into app users and registration.
What’s Next?
Investors will watch the login tests, the outcome of the Google data-licensing talks, and whether marketing spending can offset falling search referrals. Huffman called the fourth-quarter outlook “still a strong guide,” but US user trends will be the key metric in the next report.
