Reddit Shares Fall Sharply Following Lower Sales Forecast And Login Changes

UPDATE - follow-up to Reddit stock plunges 30% after weak outlook, heads for worst day ever: Reddit shares dropped 29.22% on Friday, marking the largest single-day decline for the company since its public market debut in 2024. This surpassed the previous record drop of 20.99% recorded on July 31.

Financial Results

For the fourth quarter, the social media firm projected sales between $1 billion and $1.03 billion, falling short of Wall Street estimates of $1.05 billion. Earlier in the year, the company posted third-quarter sales growth of 53% compared to the previous year, which marked a slowdown from earlier quarters, though it still beat expectations for both earnings and revenue.

Traffic And Login Changes

CEO Steve Huffman stated in an interview that search-referral traffic from Google declined significantly during the quarter due to the expansion of Google's AI Overview feature. In response, Reddit announced plans to test a new requirement asking users to log in before viewing site content. Huffman noted that Reddit was the last major platform to allow open, logged-out access. The company aims to increase its pool of active logged-in users to strengthen its advertising business. Following the announcement and earnings report, several analysts downgraded the stock, with Citizens pointing out that search changes create difficulties in content monetization.

Context

Changes in search engine algorithms and AI summaries can alter how internet users discover website content. Technology platforms often adjust their access rules and login requirements to protect data and build direct relationships with their active user base.