Reddit shares fall 29% as Google AI search cuts its traffic

Google's AI search is cutting the traffic Reddit relies on, and investors marked the stock down on Friday. Reddit shares fell 29.22% on 30 October, their worst day since the company's 2024 IPO. The previous worst day came on 31 July, when the shares dropped 20.99%.

Reddit's third-quarter numbers still show strong growth. Revenue rose 53% year on year to $895 million, net income reached $283 million, and average revenue per unique rose 36% to $6.87, according to CNBC's report on the results. The problem was the outlook. Fourth-quarter revenue guidance of $1.00 billion to $1.03 billion fell short of the $1.05 billion analysts expected. Daily active uniques (DAUq) reached 130.3 million, up 12%, but also trailed estimates of 133.7 million.

Chief executive Steve Huffman said search referrals from Google fell meaningfully in the quarter because of AI. He added that Google's AI Mode "does not drive traffic" to Reddit or, as far as he knows, to anyone else. Reddit's letter says referrals fell by more than 1 million a week on average in October, and the decline sped up late in the quarter.

The drop is concentrated in logged-out users. U.S. DAUq fell from 53.2 million to 50.7 million, with logged-out users down from 30.1 million to 27.3 million, while logged-in users edged up from 23.1 million to 23.4 million. Reddit will start testing a logged-in-only experience in select markets outside the U.S. in the fourth quarter, though it has not named them. Logged-in and app users already account for more than 80% of monetisation. Reddit says some version of the site will remain available before a hard login prompt, and shared links will keep working, according to Search Engine Journal.

If the trend continues, Reddit's total DAUq could fall by a low-double-digit percentage in the fourth quarter from its 130 million base. Analysts at Citizens said the search changes highlight the problem with selling content to Google, and that referral problems and login uncertainty add pressure on monetisation. Google has not responded in either report. One secondary source says Google has stated that AI Mode queries earn less than traditional search, but this has not been found in a primary Google statement.

Reddit's monetisation depends on users who log in. Logged-in and app users already generate more than 80% of it, so the logged-out audience that Google search has been sending is the segment now at risk. A login wall moves that audience toward the group that already pays. The danger is that some of those users leave rather than sign in, and the pace of the referral decline shows how quickly that gap could open.

For investors, the next test is the fourth quarter. Watch which markets Reddit picks for the logged-in-only trial, whether referrals keep falling at the October pace, and whether total DAUq drops by the low-double-digit percentage the trend implies. Google's answer to the claim about AI Mode queries will also matter for how far the traffic problem is seen as Reddit's alone.