Reddit Shares Drop Over 15% Amid User Growth Concerns
Reddit shares experienced a significant drop of over 15% on Wednesday following the release of its fourth-quarter earnings report, which revealed weaker-than-expected user growth. The company reported an average of 101.7 million daily active unique users (DAUq) for the quarter, a 39% increase from the previous year but below Wall Street’s estimate of 103.1 million. Reddit CEO Steve Huffman attributed the shortfall to a Google search algorithm change that caused “volatility” in user growth during the quarter. However, he noted that search-related traffic had recovered in the first quarter of 2025.
Despite the user growth miss, Reddit posted strong financial results. Revenue surged 71% year-over-year to $428 million, exceeding analysts’ expectations of $405 million. Net income nearly quadrupled to $71 million, or 36 cents per share, compared to $18.5 million, or breakeven, in the same period last year. Adjusted earnings also surpassed estimates, coming in at $154 million versus the expected $128 million. The company provided optimistic guidance for the first quarter of 2025, forecasting revenue between $360 million and $370 million, ahead of the $358 million consensus estimate.
Reddit’s stock has seen remarkable growth since its initial public offering (IPO) in March 2024 at $34 per share, climbing to $216.47 as of Wednesday’s close. However, the after-hours selloff following the earnings report highlighted investor concerns over user growth. Huffman emphasized that Google’s algorithm changes occur about twice a year and primarily affect logged-out users in the U.S., but the company has successfully navigated such fluctuations in the past.
The social media platform has been focusing on converting logged-out users into logged-in accounts, which are more lucrative for its business. Logged-in DAUq grew 27% year-over-year to 46.1 million, while logged-out DAUq rose 51% to 55.6 million. Reddit’s ability to adapt to external challenges and maintain strong revenue growth suggests potential for long-term success, though its stock remains volatile.
Reddit shares plunge after Google algorithm change contributes to miss in user numbers
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Reddit (NYSE: RDDT) recently announced its Q4 earnings, reporting a profit of $0.36 per share on revenue of $428 million.
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Reddit Stock Tumbles as User Growth Misses Expectations
Reddit reported fourth-quarter earnings that topped analysts' estimates, but its user growth fell short, sending shares lower in extended trading Wedn
www.investopedia.comReddit's stock drops 15% after the CEO said a Google algorithm tweak hurt traffic
CEO Steve Huffman said a Google algorithm tweak caused volatility on the site.
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