Reddit’s shares dropped 30.44% to $90.15 on Friday, adding to a 44% decline over the week. The fall followed the company’s third‑quarter results, which showed a 53% jump in revenue to $895 million but a weaker fourth‑quarter forecast of $1 billion to $1.03 billion. CEO Steve Huffman said Google’s AI‑powered search features are siphoning off referral traffic and could shrink the platform’s user base.

Google AI Cuts Referral Traffic

Decrypt reported that Google search referrals fell by more than one million each week in October, a trend that accelerated toward the end of the third quarter. Huffman explained that AI overviews and AI mode deliver answers directly in Google’s results, allowing users to obtain information without visiting Reddit. This shift is eroding the traffic that has historically supported Reddit’s advertising revenue.

User Numbers and Revenue Impact

Reddit announced 130.3 million daily active unique visitors, up 12% year over year but below the roughly 134 million analysts had expected. In the United States, the figure fell 2% to 50.7 million. Huffman warned that if the current pace continues, daily active users could drop by a low double‑digit percentage in the fourth quarter. The company’s revenue guidance for the quarter reflects these concerns.

Strategic Moves and Partnerships

To reduce dependence on search referrals, Reddit is testing a logged‑in‑first experience in selected markets outside the U.S. during the fourth quarter. The platform has also signed data licensing agreements with Google and OpenAI, monetising its discussion archive for AI developers. However, the same AI‑driven search experience that benefits these partners also reduces traffic to Reddit itself.

What to Watch Next

Investors will monitor Reddit’s fourth‑quarter earnings to see if the company can meet its revenue guidance. The results of the logged‑in‑first test and any further changes to Google’s AI search features that could affect referral traffic will also be key.