Reddit falls 29.22% as Google AI Overviews cut referrals

Reddit's Friday selloff is notable because it came despite a strong quarter. Revenue rose 53% year over year to $895 million, net income reached $283 million, and diluted earnings per share of $1.40 beat a $1.33 consensus — yet none of that held the stock. The market's focus was on what comes next: Q4 revenue guidance of $1.00 billion to $1.03 billion landed below the roughly $1.05 billion consensus, and the company warned daily active unique users could decline by a low-double-digit percentage from 130.3 million.

The driver CEO Steve Huffman pointed to is search referral traffic. He told analysts that referrals from Google were down meaningfully in Q3 and that the decline accelerated later in the quarter, with AI Overviews cutting Reddit's referrals by more than one million visits per week in October alone. His comment that "AI Mode does not drive traffic, not for us and not for anybody, as far as I know" frames the issue as structural rather than a one-quarter dip.

Reddit's proposed fix is a logged-in-only experience, to be tested starting in Q4 in select markets outside the United States. The company says the shift protects its content from AI crawlers and strengthens first-party ad targeting, and it notes that logged-in users already account for more than 80% of monetization. The sell side reacted quickly: Citizens cut the stock to Market Perform from Market Outperform, writing that "search changes highlight the problem with selling content to Google" and that uncertainty around user growth as the login requirement rolls out "puts more pressure on user monetization." Reddit also guided Q4 adjusted EBITDA to $480 million to $510 million.