Business & Finance

Reddit Shares Drop 15% as Company Announces Login‑Only Access Amid Falling Google Traffic

By Jonathan Vanian

Reddit announced that it will require all users to create official accounts to access the platform, a significant change for the site known as "the front page of the internet." The announcement came during the company’s third‑quarter earnings release, in which Reddit beat estimates on both earnings per share and revenue but issued weaker guidance for the fourth quarter. Shares fell more than 15% after the results were posted.

The company reported earnings per share of $1.40 versus the $1.35 expected by LSEG, and revenue of $895 million versus the $878 million forecast. CEO Steve Huffman told CNBC that search‑referral traffic from Google had "down meaningfully in this quarter" because of a shift to AI‑driven content and overviews. That decline has prompted Reddit to focus on its core users who arrive directly.

Reddit will begin testing the login requirement in the fourth quarter outside the United States. The company said it is still determining which parts of the service logged‑out users will see and will refine the details during testing.

In the third quarter, daily active unique users (DAUq) rose 12% year‑over‑year to 130.3 million, below analysts’ estimate of 133.7 million. U.S. DAUq fell 2% year‑over‑year to 50.7 million, below the projected 53.5 million.

Reddit’s revenue is largely driven by online advertising, which monetizes logged‑in users more effectively. Huffman said the company is growing app users and logged‑in users, which are the most valuable for advertisers.

Third‑quarter sales grew 53% year‑over‑year, ending eight straight quarters of revenue growth above 60%. Fourth‑quarter sales are projected between $1.00 billion and $1.03 billion, below the $1.05 billion estimate. Huffman described the guidance as "still a strong guide".

The company’s average revenue per user (ARPU) was $6.87, higher than the $6.50 expected. Other revenue, including data‑licensing, rose 35% year‑over‑year to $48 million. Reddit’s largest data‑licensing partners are OpenAI and Google, and the company is in negotiations with Google over a future agreement.

Huffman said the login requirement is a "big change" and reflected on Reddit’s history of open access. He added that the company will continue marketing spend to offset the decline in search referrals.

"Reddit’s mission is to create community and belonging for everyone in the world," Huffman said. "While there is overlap with other players in the ecosystem, our focus remains on communities and conversations."