Reddit beats estimates but weak fourth-quarter revenue guidance sends shares down about 22%

Louis Juricic | Thu, October 29, 2026 at 1:58 PM PDT | 4 min read

Tickers: RDDT −29.22% | GOOG −1.45%

Investing.com — Reddit reported third-quarter results that topped analyst estimates, but shares sank sharply after the social media company issued a weaker-than-expected revenue outlook and warned of accelerating declines in search referral traffic.

The stock is down about 22% shortly after the open on Friday.

Q3 Results Beat Estimates

Reddit reported adjusted earnings of $1.40 per share, beating the consensus estimate of $1.33. Revenue rose 53% year over year to $895 million, above expectations of $874.9 million.

Weak Q4 Guidance

However, the company forecast fourth-quarter revenue of $1.00 billion to $1.03 billion, putting the midpoint of $1.015 billion below Wall Street's $1.05 billion estimate.

Search Referral Traffic Declines

The outlook comes as Reddit faces mounting pressure from changes in how users discover content online. Search referral traffic declined meaningfully in the third quarter, with the downturn accelerating toward the end of the period, CEO Steve Huffman said in a shareholder letter.

In October, search traffic fell by more than 1 million referrals per week on average. If the trend continues, Reddit warned that daily active unique users (DAUs) could decline by a low-double-digit percentage in the fourth quarter from its current base of 130.3 million.

Reddit's DAUs grew 12% in the third quarter, a 6 percentage point slowdown from the previous quarter. The shortfall came mainly from U.S. logged-out users as Google's AI Overviews cut referral traffic from one of Reddit's largest user acquisition channels.

Analyst Reactions

"RDDT's delivery of strong Revenue/EBITDA growth (53%/70%) was overshadowed by worsening U.S. DAU declines, as increased prevalence of AI Overview negatively impacted referral traffic," Jefferies analyst John Colantuoni said.

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"Growth is also expected to slow in 4Q, which is likely to raise concern about sustainability. We think the stock could be rangebound near-term until a recovery in user trends emerges, but still like the long-term story as monetization upside helps drive peer-leading revenue growth," he added.

Weekly active uniques grew 16% to 515.2 million.

KeyBanc Capital Markets downgraded Reddit after the earnings release:

"We are downgrading shares of RDDT from OW to SW as our thesis is not playing out; search traffic is a larger headwind than envisioned (potential for a LDD% q/q decline in 4Q), and this creates more uncertainty around '27E/'28E revenue and EBITDA," they wrote.

Separately, Citizens also cut the stock to Market Perform from Outperform, citing the sequential deceleration in U.S. DAUs. "Reddit will begin testing a logged in user experience as it expects to receive increasingly less traffic from Google, which is a headwind for top-of-funnel and reengaging users."

Company Strategy

Reddit CEO Huffman said the company was focusing on growing its logged-in and app audiences, which account for more than 80% of Reddit's monetization. Reddit plans to improve user retention, expand app adoption and begin testing a primarily logged-in experience in select markets outside the U.S. in the fourth quarter.

"Our business is growing because the Reddit experience captures the human experience in a way that no other platform can replicate," Huffman said.

He added that surpassing $3 billion in revenue over the past 12 months demonstrated the strength of Reddit as a destination and the differentiated value of its platform.

Additional Q3 Metrics

• Advertising revenue: Up 54% year over year to $847 million
• Net income: Rose 74% to $283 million (32% net margin)
• Adjusted EBITDA: Climbed 70% to $402 million (45% margin)
• Q4 adjusted EBITDA forecast: $480 million to $510 million
• Share repurchases: Approximately 670,000 shares for $100 million during the third quarter

Vahid Karaahmetovic contributed to this report.

Source: Original Article