Reddit (RDDT) shares fell 29% on Friday to close at $91.73 after the company's third-quarter results showed a decline in U.S. daily users and weaker-than-expected fourth-quarter revenue guidance. The stock had closed at $129.60 the previous day and finished below its 52-week low of $119.27.

The decline followed a quarterly report in which Reddit CEO Steve Huffman blamed Google's AI search features for reducing referral traffic to the platform. Reddit's financial results were stronger: Third-quarter revenue increased 53% to $895 million, while U.S. revenue rose 50% to $719 million. Diluted earnings per share came in at $1.40, exceeding Wall Street's $1.33 estimate. The gap between the beat and the sell-off underlined the tension running through the report: strong execution inside the business, with a key traffic input that Reddit itself says it does not control.

However, U.S. daily users fell to 50.7 million, a decrease of 2.5 million, or 4.7%, from the second quarter. U.S. daily users were also down 1% from a year earlier. The decline was concentrated among users who access Reddit without logging in, many of whom arrive through Google search and see fewer advertisements.

U.S. Traffic Weakens

Reddit's U.S. logged-out user group declined 9% from the second quarter and 4% year over year. Logged-in U.S. users increased 1% year over year. Globally, daily users rose 12% from the prior year to 130.3 million, indicating that the weakness was concentrated in the U.S. market.

Huffman said search referrals had declined by more than 1 million per week in October. “People still want Reddit. It's just Google is not sending them to Reddit the way they used to,” he said during the earnings call.

He added that Google continues to crawl Reddit as actively as before. “The reality is the AI Mode does not drive traffic, not for us and not to anybody as far as I know,” Huffman said.

The comments were also highlighted in an X post by Nic on October 31, 2026:

The collapse of Reddit will be studied. After reporting earnings, its stock collapsed 30% in a single day. It's down 44% in 2 weeks. But the most important detail is what was revealed in that earnings call. The CEO said AI is killing Google search. People no longer get sent… pic.twitter.com/eYhVF4Tknj — Nic (@puckrin) October 31, 2026

https://x.com/puckrin/status/2116530578510250073?ref_src=twsrc%5Etfw

Reddit guided for fourth-quarter revenue of between $1 billion and $1.03 billion, below the $1.045 billion analyst consensus. The company also warned that fourth-quarter daily users could decline by a “low double-digit percentage” if current Google traffic trends continue.

Analysts Lower Price Targets

JP Morgan lowered its price target for Reddit to $150 from $185, citing headwinds to search traffic. Goldman Sachs reduced its target to $140 from $215, pointing to weaker referrals and a decline in logged-out users. Both revised targets remain above Friday's closing price of $91.73.

Reddit has agreements with Google and OpenAI that allow the companies' artificial intelligence models to train on Reddit content. The agreements pay Reddit $60 million and $70 million per year, respectively. The arrangements leave Reddit in a two-sided relationship with Google: the search company pays for Reddit's data at the same time that, by Reddit's account, its AI features are thinning the referral traffic that used to send it readers.

Reddit Chief Operating Officer Jen Wong said 80% of the company's monetization comes from logged-in users and users of its mobile application. Reddit has said this group is the most important to its revenue generation.

Huffman said Reddit cannot control Google's decisions regarding search. “We only control Reddit,” he said.

The company plans to require all users to create accounts and sign in to access the site, a move it hopes will support its user base. The plan could also affect the logged-out audience that currently reaches Reddit through search results. If carried out, the requirement would move search-driven arrivals into the account-holding segment that Wong identified as the core of Reddit's monetization.

Alphabet's stock also declined during the week. The company lost almost $500 billion in market value after reporting slower search advertising growth, while GOOG fell 1.45% on Friday. The same week's results put both sides of the search relationship under the market's eye: Reddit attributing its traffic loss to Google's AI features, and Google's parent reporting slower growth in search advertising.

Reddit shares traded at $92.20 in after-hours trading on Friday, up 0.51%. Investors will be watching whether U.S. logged-in users remain above 23.4 million and whether fourth-quarter revenue reaches at least $1.0 billion when Reddit reports early next year. The rollout of the mandatory sign-in policy is the other development to track, as Reddit attempts to convert search-driven visitors into account holders.