Reddit Shares Face Volatility Amid Strong Revenue Growth and Search Traffic Concerns
Reddit (RDDT) has experienced significant stock price declines following its Q3 earnings report, despite reporting robust financial growth. The company saw revenue surge 53% year-over-year to $895 million, driven by a 54% increase in advertising revenue and strong performance in video and lower-funnel ad products. Additionally, adjusted EBITDA rose significantly to $402 million, with earnings per share topping analyst expectations. However, investor concerns center on slowing user growth and declining organic traffic from Google search engines due to changes in AI-driven search results. CEO Steve Huffman noted that shifts in how Alphabet's search engine displays content have reduced referrals to the platform. While Reddit is successfully increasing monetization through higher average revenue per user (ARPU), the potential for long-term declines in daily active users remains a primary risk factor.