Reddit Gets a 30.44% Reality Check as Google’s AI Search Takes the Clicks

Reddit shares plunged 30.44% to $90.15 on Friday after CEO Steve Huffman warned that Google’s AI-powered search features are reducing referral traffic and could shrink the platform’s user base. The selloff followed strong third-quarter results but a weaker-than-expected revenue forecast for the current quarter.

Revenue climbed 53% year over year to $895 million, while advertising revenue increased 54% to $847 million. Net income reached $283 million, and diluted earnings per share came in at $1.40, up 75% from a year earlier and above the $1.33 analyst consensus. Reddit reported 130.3 million daily active unique visitors, up 12% year over year but below the roughly 134 million analysts expected. In the U.S., the audience fell 2% to 50.7 million.

During Thursday’s earnings call, Huffman said Google search referrals had fallen by more than one million on average every week during October, with the decline accelerating toward the end of the third quarter. He said that if the pace continued, Reddit’s total daily active users could fall by a low double-digit percentage in Q4 from the current base of around 130 million.

Huffman identified Google’s AI Overviews and AI Mode as features generating answers and summaries directly within search results rather than directing users to external websites. Asked whether the changes were responsible for Reddit’s declining search traffic, he said the AI features had expanded aggressively in the U.S. and internationally. “The AI mode does not drive traffic, not for us and not to anybody as far as I know,” he told investors.

The referral decline puts pressure on Reddit’s advertising business and could affect both user acquisition and engagement with the platform. Reddit is moving toward a primarily logged-in experience in an effort to reduce its dependence on Google search referrals.