Reddit shares plunged more than 25% at the open on Friday after the social media company's third-quarter earnings were overshadowed by weak user growth and cautious fourth-quarter guidance. The stock had already been down 41% in 2026 before the move, and analysts at BofA Securities and Citizens downgraded their ratings while Guggenheim and Needham cut price targets sharply.
For Q3, Reddit reported adjusted earnings of $1.40 per share, above the $1.33 to $1.35 consensus range, and revenue of $895 million, up 53% year over year and ahead of estimates near $870 million. Net income rose 74% to $283 million, and adjusted EBITDA climbed 70% to $402 million. Advertising revenue grew 54% to $847 million. However, global daily active uniques were 130.3 million, below estimates of roughly 133-134 million, and U.S. daily active uniques fell 2% to 50.7 million from 53.2 million in the second quarter—marking the first annual contraction since Reddit's 2024 IPO.
Chief Executive Steve Huffman said search referrals declined by more than one million per week on average in October, and warned that daily active users could fall by a low double-digit percentage in Q4 from about 130 million. He pointed to Google's AI-powered search experience, saying it 'does not drive traffic, not for us and not to anybody.' Reddit plans to focus on logged-in and app users, who represent more than 80% of monetization, and may test a mostly logged-in experience in select markets outside the U.S. in the fourth quarter.
Reddit guided Q4 revenue to $1.00 billion to $1.03 billion, with a midpoint below Wall Street's $1.05 billion estimate, and Q4 adjusted EBITDA to $480 million to $510 million. The company gave no update on data licensing negotiations with OpenAI and Google, reportedly worth an estimated $60 million to $70 million each per year. BofA cut its price target to $135 from $190, Guggenheim to $170 from $255, Needham to $150 from $300, and Citizens downgraded the stock to Market Perform.
