Reddit shares plunged in premarket trading on Friday, October 30, despite the company beating third-quarter expectations, after chief executive Steve Huffman warned that falling Google search referrals could cut daily users by a low double-digit percentage in the fourth quarter.
Reports put the premarket fall at roughly 22%, to near $100, after the stock closed Thursday at $129.60. The shares had already fallen about 18% in after-hours trading on Thursday evening, once the results and warning were released. The exact premarket percentage moved during the morning session, so the fall is best described as more than a fifth.
Strong quarter, weak warning
Reddit reported third-quarter revenue of $895 million, up 53% from a year earlier and ahead of analyst expectations of about $875 million to $878 million. Adjusted earnings were $1.40 per share, above the expected $1.33 to $1.35. Advertising revenue rose 54% to $847 million, and net income reached $283 million.
But the user numbers disappointed. Daily active uniques reached 130.3 million, up 12% year on year but below analyst estimates of about 133 million to 134 million. United States daily users fell 2%, while international users grew 24%. Weekly active uniques rose 16% to 515.2 million.
Fourth-quarter revenue guidance of $1.00 billion to $1.03 billion also came in below the roughly $1.05 billion analysts had expected at the midpoint, adding to the selling pressure.
Why AI search is hurting Reddit
Huffman said search referral traffic was down meaningfully in the third quarter, with the decline accelerating later in the quarter. During October, he said, search referrals dropped by more than 1 million on average per week.
“If this rate of decline continues, current trends would suggest that total DAUQs could fall in Q4 by a low double-digit percentage from our current base of 130 million DAUQs,” Huffman said on the company’s earnings call on Thursday, according to Barron’s.
The mechanism, as described by Huffman and in coverage of the results, is Google’s shift to AI Mode and AI Overviews: users increasingly read an AI-generated summary instead of clicking through to websites, and Reddit — frequently cited in those summaries — is losing the referral clicks that used to bring readers back.
Huffman argued on the call that search referral trends “do not determine our relevancy”, and in his shareholder letter he wrote that web search is evolving “from a gateway to the web to becoming an AI-powered destination itself”. He added that AI does not fulfil people’s need for community and connection — the core of Reddit’s appeal.
Reddit’s response: a logged-in future
Reddit said it will begin testing a requirement that users log in, starting in select international markets in the fourth quarter, as part of Reddit’s move to a primarily logged-in experience. Huffman said logged-in and app users make up more than 80% of Reddit’s monetisation, and the company hopes the shift will protect engagement even as logged-out web traffic falls.
The warning matters beyond Reddit. It is one of the clearest examples yet of a large platform telling investors, in numbers, that AI search summaries are changing how much traffic the open web receives — a concern shared by publishers and other sites that depend on search referrals.
What to watch next
Investors will watch whether the October referral decline stabilises or deepens in November, whether the logged-in tests change user behaviour, and whether fourth-quarter revenue lands at the top or bottom of the $1.00 billion to $1.03 billion range. Reddit’s content licensing deals with Alphabet and OpenAI, estimated at $60 million to $70 million each per year and up for renewal, are another open question.
For now, the market verdict is clear: a 53% revenue rise was not enough to offset a warning that the company’s audience itself could shrink.
Frequently asked questions
Why did Reddit shares fall? Despite beating earnings expectations, Reddit warned daily users could fall by a low-double-digit percentage in Q4 as Google AI search referrals decline, and guided Q4 revenue below expectations.
What were Reddit’s Q3 results? Revenue of $895 million, up 53%, adjusted earnings of $1.40 per share, and 130.3 million daily active uniques, up 12% year on year.
What is Reddit doing about search traffic? It plans to test a primarily logged-in experience, starting in select international markets in Q4, to protect engagement among logged-in and app users.
Sources
Barron’s — https://www.barrons.com/articles/reddit-earnings-stock-price-be87d7f8
Investor’s Business Daily — https://www.investors.com/news/technology/reddit-stock-q3-2026-rddt-news/
CoinCentral — https://coincentral.com/reddit-rddt-stock-sinks-22-even-after-beating-earnings-heres-why/
Asianet Newsable — https://newsable.asianetnews.com/amp/markets/rddt-stock-drops-as-soft-q4-revenue-guidance-search-traffic-decline-and-logged-in-only-transition-weigh-articleshow-idppt3d
