Reddit Shares Plunge 30% After Company Says Its Q3 Search Traffic Was “Down Meaningfully”

A day after Alphabet lost $500 billion in market value due to a slowdown at Google, Reddit stock plunged 30% Friday after the company said its search traffic was “down meaningfully” in the third quarter.

Shares in the digital platform, which went public in 2024, were trading at around $90.20 in the latter half of the trading day. They have fallen 60% in 2026 to date.

Financial results in the July-to-September quarter topped Wall Street analysts’ forecasts, with revenue surging 53% over the prior-year period to $895 million. Earnings per share jumped to $1.40 from 80 cents.

Despite the earnings beat, investors were alarmed by a softer-than-expected forecast for fourth-quarter revenue and user growth. Daily user levels fell 2% in the quarter, and the company said they could decline in the fourth quarter “by a low-double-digit percentage” from 130 million.

The company’s updated revenue outlook for the fourth quarter of between $1 billion and $1.03 billion fell short of analysts’ $1.05 billion consensus.

Google search dynamics, a foundational part of the digital economy for two decades, are continuing to get upended by AI. Platforms and publishers of all shapes and sizes are experiencing major disruption, and investors fear Alphabetm

“Our search referral traffic was down meaningfully in Q3, with the decline accelerating later in the quarter,” Reddit wrote in a shareholder letter. “The biggest impact was on logged-out and web traffic, but some of the impact flows through to logged-in and app traffic, since search referral is a common source of reengagement for users.”

In the letter, Reddit sought to differentiate itself from other forms of digital content, saying AI and social media do not provide the community experience that has been Reddit’s signature since its launch in 2005.

“Social media has evolved from friends and families to followers and famous people, and from status updates to the mindless scroll,” the letter said. “Web search is evolving from a gateway to the web to becoming an AI-powered destination itself. While extraordinarily useful and powerful, AI search solves a different problem than Reddit. AI does not fulfill people’s fundamental need for community, connection, and belonging with other people, and it lacks context and nuance.”