Reddit beat earnings expectations on Thursday, October 29, and its stock still fell hard. Shares dropped about 18% in after-hours trading and were down more than 20% in premarket trading on Friday, October 30.
The reason was not the past quarter. It was a warning about the future, and about how artificial intelligence is changing the way people find information online.
What Happened
Reddit’s third-quarter revenue rose 53% from a year earlier to $895 million, above the roughly $878 million analysts expected. Adjusted earnings came in at $1.40 per share, also above expectations. Advertising revenue grew 54% to $847 million.
Daily active users, the number of people who visit Reddit on an average day, grew 12% to 130.3 million, but that was below the roughly 134 million analysts expected. In the United States, daily users actually fell 2% to 50.7 million, the first decline since Reddit went public in 2024. International users grew 24%, which softened the blow.
For the fourth quarter, Reddit expects revenue of $1.00 billion to $1.03 billion. The middle of that range, $1.015 billion, was below the $1.05 billion analysts had forecast.
But the number that scared investors most was about traffic. Reddit said search referrals, the visitors who arrive by clicking a link in a search engine, fell by more than 1 million per week on average in October. If that pace continues, the company warned, daily users could fall by a low double-digit percentage in the fourth quarter, from the current base of about 130 million.
Why It Happened
Reddit’s chief executive, Steve Huffman, blamed Google’s shift to AI-powered search. When people search for something today, they often get an AI-generated answer at the top of the page, and they never click through to the website. That means fewer visitors for sites like Reddit, even though their content is often used to build those AI answers.
Related reading: Why Google Stock Crashed 12.6%: What Investors Need to Know
Huffman said search referral traffic was down meaningfully in the third quarter, and the decline sped up later in the quarter. He argued that AI search “does not drive traffic, not for us and not to anybody,” and that AI answers cannot replace real communities of people.
Reddit is also changing how its site works. The company plans to test requiring users to log in to see most content, starting in selected markets outside the United States in the fourth quarter. The idea is to reduce data scraping, where other companies collect Reddit’s posts without permission, and to focus on logged-in users, who bring in more than 80% of its advertising money. But a login wall could also put off casual visitors, which is a risk the company will be testing carefully.
Think of it like a public noticeboard in a town square. For years, anyone walking past could read it. Now, the town has built a wall with a gate, and an AI assistant outside summarises the notices for passers-by. Fewer people walk in, even though the notices inside are just as useful.
Key Figures
- Q3 revenue: $895 million, up 53% (expected: about $878 million)
- Q3 adjusted earnings per share: $1.40 (expected: about $1.35)
- Advertising revenue: $847 million, up 54%
- Daily active users: 130.3 million, up 12% (expected: about 134 million)
- US daily users: 50.7 million, down 2%
- Q4 revenue forecast: $1.00 billion to $1.03 billion (expected: about $1.05 billion)
- Search referrals in October: down more than 1 million per week on average
- Possible Q4 user impact: a low double-digit percentage decline if the trend continues
Why It Matters
Reddit’s warning matters far beyond Reddit. If AI search answers keep people from clicking through to websites, every site that depends on search traffic faces the same problem: news publishers, forums, blogs and small businesses. It raises a big question about the internet’s business model. If AI companies use content created by others but send fewer visitors back, how do those creators earn money?
It also matters for Reddit itself. Advertising is its main source of income, and advertisers pay for attention. Fewer visitors, especially in the United States, could mean slower advertising growth, even if revenue is still rising fast today.
What Happens Next
Investors will watch the login test closely. If it protects Reddit’s content without driving users away, it could become a model for other platforms. If it shrinks the audience, the company may need to rethink it. The fourth-quarter user numbers, due early in 2027, will show whether the warning came true.
Reddit also has content licensing deals with Google and OpenAI, which pay for the right to use its posts to train AI systems. Those deals are up for renewal, and the company gave no update on them in this report. How those talks go could matter as much as the traffic numbers.
Final Thoughts
Reddit’s quarter shows a strange new reality: a company can grow revenue by 53% and still lose a fifth of its value in a day, because investors are worried about where its visitors will come from next year. The AI search shift is not just a technology story. It is a business story, and Reddit is one of the first big companies to put a number on what it costs.
Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.
Sources: CNBC, “Stocks making the biggest moves premarket: Intel, Amazon, Reddit, Chevron & more” (https://www.cnbc.com/2026/10/30/stocks-making-the-biggest-moves-premarket-intc-amzn-rddt-cvx.html); Reuters, “Reddit puts logged in experience first as Google AI hits traffic” (https://mymixfm.com/2026/10/29/reddit-posts-search-traffic-declines-will-push-visitor-sign-ins-to-curb-data-scraping/)
