Reddit shares sank nearly 30 percent on Friday after CEO Steve Huffman told investors that Google’s AI search features are starving the platform of traffic. The drop wiped out more than $7 billion in market value in a short stretch of trading, the steepest single-day decline since Reddit went public in 2024.
On the company’s third-quarter earnings call Thursday, Huffman was direct. “The reality is, AI Mode does not drive traffic. Not for us, and not to anybody, as far as I know,” he said. “That’s just a fundamental shift in how Google works. It used to be a traffic driver, now it’s not.” He added that AI Overviews and AI Mode have pushed ordinary results lower on the page, cutting the chance users click through to sites like Reddit.
The numbers were concrete. Search referrals fell by more than one million per week on average in October, with the slide accelerating late in the third quarter. Most of the damage hit logged-out web users, though the company said some of it carried over to logged-in and app users because search remains a common way people return to the site. Huffman warned that if the trend holds, total daily active unique users could drop by a low double-digit percentage in the fourth quarter from the current base of about 130 million.
The warning overshadowed otherwise solid results. Revenue rose 53 percent year-over-year to $895 million. Advertising revenue climbed 54 percent to $847 million. Net income reached $283 million, or $1.40 per diluted share. Adjusted EBITDA jumped 70 percent to $402 million. Global daily active unique users grew 12 percent to 130.3 million. U.S. daily active unique users fell 2 percent to 50.7 million, the first annual decline in that figure since the IPO.
Investors zeroed in on the outlook. Fourth-quarter revenue guidance of $1.00 billion to $1.03 billion landed below the roughly $1.05 billion analysts expected. Shares closed Friday near $91.73 after ending the previous day around $129.60. Reuters noted the move would erase more than $7 billion in market capitalization if the losses held. The stock had already faced pressure earlier this year over the same Google AI Overviews issues.
Huffman described the problem as a distribution issue. Reddit remains a top search term on Google, he said, and the company is still being crawled as heavily as before. “People still want Reddit,” he told analysts. “It says Google is not sending them to Reddit the way they used to.” He also pointed out that machine-translated Reddit content appears to rank lower, which mainly affects traffic outside the United States.
Reddit is testing a shift toward a more logged-in experience, starting with trials in select international markets. Logged-in and app users already drive most engagement and more than 80 percent of monetization, the company has said. The change aims to build direct relationships with users and limit scraping of its content as AI systems pull from the open web.
The episode points to a larger change for sites that once depended on Google for visitors. Traditional results pages long sent users to publishers, forums, and platforms. As AI features answer questions on the results page itself, that referral traffic has thinned for many of those sites. Huffman treated the shift as structural. Reddit continues to report strong advertising growth while looking for ways to rely less on external search.
Reddit went public in March 2024. Huffman co-founded the site in 2005 with Alexis Ohanian and returned as CEO in 2015. He has previously said the traditional “10 blue links” model created real value across the web, value he says AI Overviews have not matched in the same way. The company maintains data licensing deals with major AI providers, including Google, though the economics of those arrangements remain under discussion as search behavior changes.
