Reddit shares plunge 30% after company says its third-quarter search traffic was ‘down significantly’

A day after Alphabet lost $500 billion in market value due to a slowdown at Google, Reddit stock plunged 30% on Friday after the company said its search traffic “declined significantly” in the third quarter.

Shares of the digital platform, which went public in 2024, were trading at around $90.20 in the second half of the trading day. They have fallen by 60% in 2026 to date.

Financial results for the July-September quarter beat Wall Street analysts’ forecasts, with revenue rising 53% from the year-earlier period to $895 million. Earnings per share fell from 80 cents to $1.40.

Despite falling profits, investors were alarmed by weaker-than-expected forecasts for fourth-quarter revenue and user growth. Daily user levels fell 2% during the quarter, and the company said they could decline in the fourth quarter “by a low double-digit percentage,” from 130 million.

The company’s updated fourth-quarter revenue guidance of $1 billion to $1.03 billion falls short of analysts’ consensus of $1.05 billion.

Google search dynamics, a fundamental element of the digital economy for two decades, continue to be disrupted by AI. Platforms and publishers of all shapes and sizes are experiencing major disruption and investors fear Alphabetm.

“Our search traffic declined significantly in the third quarter, with the decline accelerating later in the quarter,” Reddit wrote in a letter to shareholders. “The largest impact has been on logged-in and web traffic, but some of the impact trickles down to logged-in and app traffic as search referrals are a common source of re-engagement for users. »

In the letter, Reddit sought to differentiate itself from other forms of digital content, arguing that AI and social media do not provide the community experience that has been Reddit’s signature since its launch in 2005.

“Social media has evolved from friends and families to followers and famous people, and from status updates to silly scrolls,” the letter states. “Web search is evolving from a gateway to the web to itself becoming an AI-powered destination. While it is extraordinarily useful and powerful, AI search solves a different problem than Reddit. AI doesn’t address people’s fundamental need for community, connection, and belonging with other people, and it lacks context and nuance.”