Reddit, Inc. (NYSE:RDDT) shares are trading lower premarket on Friday after the company reported third-quarter results that topped expectations. At the same time, weaker-than-expected guidance and declining search traffic weighed on sentiment.
The company forecast fourth-quarter revenue of $1.00 billion-$1.03 billion, below the $1.046 billion analyst estimate.
CEO Steve Huffman said search traffic declined by more than 1 million referrals on average per week during October, warning that daily active uniques (DAUs) could fall by a low-double-digit percentage in the fourth quarter from the current level of 130 million if the trend continues.
Management cited Google’s AI Overviews and AI Mode, along with lower rankings for machine-translated content, as possible factors behind the decline.
Huffman said the traffic weakness does not reflect softer consumer demand, noting that Reddit remains a top Google search term.
Earnings Snapshot
Reddit reported third-quarter revenue of $895 million, up 53% year over year and above the $878.02 million analyst estimate. Earnings per share came in at $1.40, beating the $1.36 consensus.
Advertising revenue increased 54% to $847 million, while other revenue grew 35% to $48 million.
Stronger pricing, impressions and conversions drove ad growth. Ad clicks rose more than 50%, while conversion volume more than tripled.
Scaled advertising revenue increased over 80%, and mid-market active advertisers grew more than 50%. Shopping and app-install campaigns each expanded more than 95%.
U.S. revenue rose 50%, international revenue climbed 67%, and average revenue per unique user increased 36% to $6.87.
Reddit repurchased approximately $100 million of shares during the quarter at an average price slightly below $150, with $660 million remaining under its buyback authorization.
The company ended the quarter with $3.03 billion in cash and marketable securities, while capital expenditure totaled just $1.2 million.
Advertising And AI Initiatives
Reddit MAX adoption more than tripled sequentially after entering public beta. Video advertising revenue more than doubled, while shopping tools expanded to support up to 20 million products.
The company also expanded its machine-learning capabilities, lead-generation tools and integrations with advertising partners. Revenue from its Ads API ecosystem increased more than 45% quarter over quarter.
Search Traffic And Engagement
Reddit is prioritizing direct engagement through improved personalization, feed performance and app conversion.
First-week retention among new app users increased more than 50% year over year, while video engagement also improved.
The platform added 1 billion posts and comments in the third quarter, while AI-powered moderation efforts helped reduce the median enforcement response time from 58 hours to five seconds during 2026.
Logged-In Experience And Marketing Strategy
Reddit plans to test a primarily logged-in experience in selected international markets during the fourth quarter of 2026.
The shift is intended to improve engagement and ad targeting while limiting data scraping, which Huffman said occurs largely through logged-out access. Logged-in and app users account for more than 80% of monetization.
Reddit said it remains open to data-licensing agreements that support its long-term strategy and provide fair value, while also exploring the return of an in-app Incognito Mode to improve retention.
Reddit is also shifting U.S. marketing toward app installs and brand campaigns, as web campaigns have delivered weaker retention.
App-install campaigns have achieved retention rates comparable to organic users, while international web marketing is increasing to help offset declining search referrals.
Outlook
Reddit forecasts fourth-quarter revenue of $1.00 billion-$1.03 billion, below the $1.046 billion analyst estimate.
The company’s trailing 12-month revenue has surpassed $3 billion, according to its COO.
Management sees further opportunities to grow engagement, advertising revenue and average revenue per user as it works toward its longer-term $5 billion revenue target.
Huffman also said Reddit has significantly reduced the time required to train and deploy new AI models.
Meanwhile, the CFO noted that headcount increased approximately 3% sequentially and 12% year over year.
RDDT Price Action: Reddit shares were down 18.97% at $105.01 during premarket trading on Friday. The stock is trading at a new 52-week low, according to Benzinga Pro data.
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