Reddit shares plunge 29% after warning of falling search referrals, risks to user growth
Key Facts
Reddit shares fell 29% in Friday's session on October 30, 2026, their biggest one-day decline, after the company warned that falling search referrals were weighing on traffic and could limit user growth. Reuters reported that the warning included the possibility of a low double-digit percentage decline in daily active users in the fourth quarter if referrals continued to fall. This came despite the company posting strong revenue growth in the third quarter. The concern centers on Reddit's ability to convert search traffic into an audience that continues to use the platform and generate advertising revenue. In this context, Chief Executive Steve Huffman said Google's AI search features are not driving traffic to Reddit.
Company data showed average daily active users reached 130.3 million in the third quarter, up 12% year over year, while average weekly active users rose 16% to 515.2 million. The divergence highlights the different trajectory of the U.S. audience compared with the expansion in the overall total, as the company relies on continuing to attract and engage users. Huffman said search engine referrals to Reddit fell by more than one million a week on average during October. That decline puts search traffic at the center of the company's fourth-quarter warning.
By contrast, total revenue reached $895 million in the third quarter, up 53% year over year. Most revenue came from advertising, which generated $847 million, up 54% from the same period a year earlier. Reddit attributed advertising revenue growth to higher prices and more ad impressions. Other revenue totaled $48 million, up 35% year over year, according to the shareholder letter filed with the U.S. Securities and Exchange Commission. The figures show commercial growth during the same period that concerns mounted over referrals that fuel user acquisition.
Huffman said Google is still crawling Reddit at the same rate, adding that "AI mode is not bringing traffic, to us or to anyone." The company's comments focus on the effect of AI-powered search answers on the user journey: a searcher may see information linked to Reddit content on the results page without visiting the site. Discussing the company's direction, Huffman said Reddit would focus on making the platform a daily destination users visit directly. The company plans to test a logged-in-only experience in selected markets outside the U.S. during the fourth quarter, to assess its impact before any broader rollout. He added that logged-in users account for more than 80% of monetization, explaining the test's focus on account holders.
The period's results show that growth in users and revenue did not erase the divergence between U.S. and overall audience metrics, or concerns over continued declines in search traffic. Chief Financial Officer Drew Vollero had said Reddit revenue for the 12 months ended in the third quarter exceeded $3 billion, and that the company's next internal target was to reach $5 billion. For the next period, the company forecast fourth-quarter revenue of between $1.00 billion and $1.03 billion, a range close to analyst estimates compiled by LSEG. But the user warning adds an operational factor to the outlook, as advertising growth could be affected by continued audience inflows and engagement. The announced test in selected markets remains the company's next step to address changes in how users reach the platform.
The October 30 announcement also covered Reddit's commercial relationship with Google: Reddit extended its cloud services agreement with the company through 2029 and committed to spending $580 million over three years. This came alongside Huffman's warning that AI search features are not driving traffic to Reddit, while he said Google continues to crawl the site at the same rate. In the market, rival Pinterest fell about 8% in Friday's session after missing analyst estimates for third-quarter revenue and earnings and forecasting fourth-quarter revenue below expectations. After Reddit's decline, at least 11 brokerage firms cut their price targets on the stock, according to Reuters. In later trading, Reddit shares closed at $98.45 on November 13, 2026, while Google shares closed at $295.77 on the same day.