RDDT Stock Drops As Soft Q4 Revenue Guidance, Search Traffic Decline And Logged-In-Only Transition Weigh

Huffman noted that search referral traffic “was down meaningfully in Q3, with the decline accelerating later in the quarter” and continuing into the new quarter.

• Reddit plans to shift toward a logged-in-only experience, beginning tests in select international markets in Q4.
• For the fourth quarter, Reddit guided to revenue of $1.00 billion to $1.03 billion, falling short of analyst expectations of about $1.05 billion at the midpoint.
• In October, search referrals dropped by more than 1 million per week on average.

Shares of Reddit Inc. (RDDT) dived 18% after hours on Thursday after CEO Steve Huffman noted a decline in referral traffic on the platform and announced a transition towards a logged-in-only experience.  

RDDT’s Q3 Snapshot

For the third quarter, the online discussion platform posted revenue of $895 million, up 53% from a year earlier. Advertising revenue rose 54% to $847 million, while other revenue increased 35% to $48 million. Net income reached $283 million, or $1.40 per diluted share, up 75% year-over-year. Adjusted core profit climbed 70% to $402 million.

Daily active uniques (DAUq) grew 12% to 130.3 million, driven by 24% growth internationally, though U.S. DAUq declined 2%. Weekly active uniques rose 16% to 515.2 million.

Search Traffic Pressure Continues Into Q4

Huffman noted that search referral traffic “was down meaningfully in Q3, with the decline accelerating later in the quarter” and continuing into the new quarter. The biggest impact fell on logged-out web traffic. In October, search referrals dropped by more than 1 million per week on average. If the trend continues, the company said total DAUqs could fall by a low-double-digit percentage in the fourth quarter from the current 130 million base.

In a letter addressed to shareholders, Huffman also addressed AI’s role in search, stating that “Web search is evolving from a gateway to the web to becoming an AI-powered destination itself.” While acknowledging AI’s utility, Huffman argued that “AI does not fulfill people’s fundamental need for community, connection, and belonging with other people, and it lacks context and nuance.”

Reddit has existing content licensing agreements with Google and OpenAI that allow their content to be used for AI model training and related products. In addition, the company is also using AI-powered tools for content moderation.

RDDT's Logged-In-Only Transition And Guidance

Reddit plans to shift toward a logged-in-only experience, beginning tests in select international markets in Q4. Huffman said the change would improve ad targeting, protect Reddit’s data corpus, and support higher engagement. “Pretty much all of the major ad-based platforms have gone through this transition,” he noted.

For the fourth quarter, Reddit guided to revenue of $1.00 billion to $1.03 billion, falling short of analyst expectations of about $1.05 billion at the midpoint, and adjusted core profit of $480 million to $510 million.

How Did RDDT Retail Traders React?

On Stocktwits, retail sentiment around RDDT stock stayed within the 'bullish' territory over the past 24 hours, while message volume increased from 'high' to 'extremely high' levels.

A Stocktwits user opined that a login requirement would “kill” Reddit.

View this Stocktwits post

Another user dismissed the selloff as an overreaction.

View this Stocktwits post

RDDT stock has dropped 44% year-to-date.  

For updates and corrections, email newsroom[at]stocktwits[dot]com.<