Reddit shares plunged more than 30% on Friday following the release of third-quarter results that showed solid revenue growth but weaker-than-expected user metrics and a cautious outlook for the current period. The stock closed at $90.15 after a 30.44% decline, contributing to a roughly 44% drop over the week.

Third-Quarter Performance

Revenue rose 53% year over year to $895 million, with advertising revenue climbing 54% to $847 million. Net income reached $283 million, and diluted earnings per share came in at $1.40, exceeding the $1.33 analyst consensus and rising 75% from the prior year.

Global daily active unique visitors, or DAUq, averaged 130.3 million in the quarter ended September 30, an increase of 12% from a year earlier. That figure fell short of analyst estimates that ranged around 133 million to 134 million. U.S. DAUq declined 2% to 50.7 million, while international DAUq grew 24% to 79.6 million. A DAUq counts a user with a unique identifier who visits the site or opens the app at least once in a 24-hour period.

Search Traffic Decline and Guidance

In its shareholder letter, Reddit reported that search traffic fell by more than 1 million referrals per week on average during October. The drop accelerated late in the third quarter. Referral counts track visits from search engines rather than unique users lost.

The company warned that if the decline in search referrals continued at that rate, fourth-quarter DAUq could fall by a low double-digit percentage from a base of about 130 million. Reddit forecast fourth-quarter revenue between $1 billion and $1.03 billion, below the roughly $1.05 billion consensus among analysts.

CEO Comments on Google AI Features

Chief Executive Steve Huffman pointed to Google’s AI Overviews and AI Mode as key factors in the reduced referrals. These features generate answers and summaries directly within search results, reducing the need for users to click through to external sites such as Reddit.

Huffman noted that the AI features had expanded aggressively in the United States and internationally. He also cited possible lower rankings for machine-translated content outside the U.S. and said the company lacked visibility into broader changes in Google’s algorithm. Reddit did not quantify the exact portion of the referral decline attributable to the AI tools.

Strategic Response and Broader Context

Reddit plans to begin testing a primarily logged-in experience in selected markets outside the United States during the fourth quarter. The shift aims to reduce reliance on open search discovery by requiring users to sign in before accessing most of the platform.

The company has previously entered data licensing agreements that allow AI developers access to its content archives. Those arrangements have provided additional revenue streams even as AI-powered search tools alter traditional traffic patterns from search engines.

At the current price of $90.15, the shares trade well below recent technical averages, with the 50-day exponential moving average near $149.80 and the 200-day average around $162.12. The shorter-term average has moved below the longer-term average.