By Hamza Faisal
Reddit shares plunged 30.44% to $90.15 on Friday, their worst day since the company went public in 2024, extending a weekly decline of 44%. The sell-off came after chief executive Steve Huffman warned that Google's AI-powered search features are cutting the referral traffic Reddit depends on — and could shrink its audience in the months ahead.
The drop followed Reddit's third-quarter earnings report, delivered Thursday. Revenue rose 53% year over year to $895 million, beating the roughly $875 million analysts expected, and net income reached $283 million, or $1.40 per diluted share. But the strong quarter was overshadowed by a weaker-than-expected forecast: Reddit guided fourth-quarter revenue to between $1.00 billion and $1.03 billion, below the roughly $1.05 billion Wall Street had pencilled in.
Shares had already fallen about 18% in after-hours trading on Thursday. Friday's session turned that slide into a rout.
A warning about the audience, not just the revenue
On the earnings call, Huffman told investors that search referrals from Google fell by more than one million visits per week on average in October, with the decline accelerating toward the end of the third quarter. If that contraction continues, he warned, Reddit's total daily active users could decline by a low double-digit percentage in the fourth quarter from a base of about 130 million.
Global daily active unique visitors were flat from the previous quarter at 130.3 million, short of the roughly 134 million analysts projected. In the United States, they fell from 53.2 million to 50.7 million, down 2% from a year earlier.
Huffman pointed directly at Google's AI Overviews and AI Mode, which generate answers inside search results rather than sending users to outside websites. "The AI mode does not drive traffic, not for us and not to anybody, as far as I know," he said on the call. He added that Google's AI features have expanded aggressively in the US and internationally, pushing traditional links further down the results page.
An awkward relationship with Google
Reddit's complaint lands awkwardly because the company is deeply intertwined with Google. Reddit licenses its data to Google and OpenAI, and analyses of AI Overviews citations have found Reddit among the most-cited sources — meaning Google leans on Reddit's content even as it sends fewer visitors to the site.
Huffman also flagged a second factor: Reddit believes its machine-translated content is being ranked lower in search results, primarily outside the United States. A 2025 Pew Research study cited in coverage of the warning found that users clicked a result on 8% of Google visits that showed an AI summary, compared with 15% of visits without one.
Jefferies analyst John Colantuoni said Reddit's strong revenue and profit growth was overshadowed by worsening US daily-user trends and the impact of AI Overviews on referral traffic, warning the stock could stay range-bound until there is evidence of a recovery.
Reddit's response: closing the open door
Reddit's answer is to pull back from the open web. Starting in the fourth quarter, the company will test a primarily logged-in experience in select markets outside the United States, a shift Huffman has said improves the experience for logged-in users, strengthens advertising, helps meet safety regulation, and protects Reddit's data from scrapers. Logged-in users already account for more than 80% of the platform's monetization.
The move marks a reversal for a site whose chief executive once insisted on keeping Reddit open to logged-out visitors. With search traffic shrinking, the company is betting that owning the relationship with its readers matters more than being discoverable through Google.
