Reddit’s quarterly revenue reaches $895 million as shares fall 18% after user warning
Key Facts
Reddit reported third-quarter revenue of $895 million, beating the average analyst estimate of $878.4 million, while its shares fell about 18% in extended trading on October 29. The move followed a warning from CEO Steve Huffman that daily active users could decline by a low double-digit percentage in the fourth quarter if search referrals continue to fall. The concern stems from referrals declining by more than one million per week on average during October. The company closed at $129.60 on October 29, after closing at $134.70 in the previous session. Reuters described the company’s fourth-quarter revenue range as close to estimates, making user pressures the market’s main concern in its reaction.
Reddit forecast fourth-quarter revenue of between $1.00 billion and $1.03 billion, equivalent to annual growth of between 38% and 42%. It also projected adjusted earnings before interest, taxes, depreciation and amortization of between $480 million and $510 million, with annual growth of between 47% and 56%. That implies a margin of about 49% at the midpoint of the adjusted earnings range. In the third quarter, diluted earnings per share of $1.40 beat analysts’ estimate of $1.33, while revenue exceeded estimates by about $20.1 million. The results combined a quarterly beat with an operational warning tied to visitor traffic in the period ahead.
Huffman said search referrals to Reddit declined by more than one million per week on average during October, and that a continuation of this pace could reduce total unique daily active users in the fourth quarter by a low double-digit percentage from a base of 130 million. The decline became clear in the third quarter and accelerated toward its end, he said, with the greatest impact concentrated in web traffic and unregistered visitors. In the United States, unique daily active users fell 2% to 50.7 million in the third quarter, the first decline since the company went public in 2024. Huffman said Google continues to index Reddit to the same extent, but noted that AI search is not directing visits to the platform. That puts Reddit’s reliance on search engine referrals under pressure as the company seeks to convert more visitors into registered users.
In response to the decline in referrals, Reddit plans to test a login-required experience in selected markets outside the United States during the fourth quarter, then measure its impact before any wider rollout. Huffman said the company will study where login prompts appear, conversion rates and engagement after registration, with changes to be expanded gradually based on the test results. The homepage will remain available to unregistered visitors, as will content reached through a search engine or shared link. The plan aims to keep basic browsing available while tying engagement to an account, since commenting and content ranking remain available to registered users. Huffman said logging in enables personalized recommendations for communities and content, provides better information for ad targeting, and helps protect platform data from unauthorized collection.
The company said registered users and app users grew sequentially in the third quarter and account for more than 80% of monetization on Reddit. Chief Operating Officer Jen Wong said registered users’ engagement is nearly five times that of unregistered users. In advertising, U.S. revenue rose 51% year over year and international revenue rose 68%, while click volume increased by more than 50% and conversion growth exceeded three times during the quarter. Advertising revenue reached $847 million, up 54% year over year, while other revenue, which includes data licensing, reached $48 million, up 35%. Wong said performance advertising accounts for more than 60% of advertising revenue, as the company bets on improving engagement and campaign targeting while expanding login use.
Reddit’s revenue for the 12 months ended in the third quarter exceeded $3 billion, and Huffman identified $5 billion as the next internal revenue target. The target comes as the advertising business grows rapidly, while the company is also facing a decline in search referrals and a drop in users in the United States. Login testing is due to begin in selected markets outside the United States during the fourth quarter, with data collected on conversion and post-registration engagement. The test results, along with the trajectory of search referrals and active users, will be among the developments to watch during the same period. Fourth-quarter revenue guidance remains a range of between $1.00 billion and $1.03 billion, with expected annual revenue growth of between 38% and 42%.