Reddit sheds $7.3B in its worst day, blaming AI for lost traffic

Reddit (NYSE: RDDT) lost about $7.3 billion of market value on Friday, October 30, after telling investors that traffic from search engines had fallen sharply and could shrink its audience in the fourth quarter. The shares fell 29.22%, their worst day since the company went public in 2024, CNBC reported, and closed at $91.73, down $37.87.

The quarter itself was strong: revenue rose 53% to $895 million. The problem was in the shareholder letter. "Our search referral traffic was down meaningfully in Q3, with the decline accelerating later in the quarter," Reddit wrote, adding that in October search traffic dropped "by more than 1 million referrals on average per week." If that continues, it said, daily active uniques "could fall in Q4, by a low-double-digit percentage" from 130 million. Chief executive Steve Huffman told CNBC the fall in referrals from Google was "due to AI."

Why a 53% quarter sank the shares

Reddit forecast fourth-quarter revenue of $1.0 billion to $1.03 billion, below the $1.05 billion Bloomberg consensus, Mint reported. Against $725.6 million a year earlier, the midpoint implies growth of about 40%, down from 53% in the third quarter, by SaasBuzz's calculation. The range runs from 38% to 42%.

The user numbers were the weaker half. Daily active uniques rose 12% to 130.3 million, but only because users outside the US grew 24%. In the US, where Reddit books four fifths of its revenue, daily uniques fell 2% to 50.7 million while US revenue grew 50%. Reddit's quarterly report says global daily uniques were flat from the second quarter, as gains from marketing "were offset predominantly by third-party search engine changes."

Source: Reddit's Q3 2026 release, shareholder letter and 10-Q. Operating margin is GAAP, calculated by SaasBuzz from income from operations.

What Reddit says AI search is doing

The letter does not name Google, but it is plain about the mechanism. "Web search is evolving from a gateway to the web to becoming an AI-powered destination itself," Huffman wrote. The biggest hit, the letter says, was to logged-out and web visitors, but "some of the impact flows through to logged-in and App traffic, since search referral is a common source of reengagement for users." The 10-Q states the risk directly: search engines adding AI summaries and answers "may change how Reddit content is displayed and reduce the likelihood that users click through to Reddit."

Huffman went further. "AI Mode does not drive traffic. Not for us, and not to anybody as far as I know," he said, The Decoder reported.

Reddit's answer is to stop showing its pages to visitors it cannot identify. In the fourth quarter it will begin testing a logged-in-only Reddit in select markets outside the US. Huffman wrote that the change gives more signals for ad targeting and "allows us to protect access to Reddit's extremely valuable corpus of data." He told CNBC that Reddit "is the last platform to provide basically unfettered logged-out access."

What the search industry is saying

Search consultants who track Google's changes read Reddit's numbers as a warning for every site that depends on search. Lily Ray, an SEO and AI search consultant, put it in one line the night the results came out.

AI answers may not be the whole story. Glenn Gabe, a consultant who tracks Google's algorithm updates, has documented how Reddit's machine-translated pages lost rankings in Google's May core update and June spam update, and he quoted Reddit on the call saying the drop came from both.

Analysts at Citizens wrote that the "search changes highlight the problem with selling content to Google" and that uncertainty over user growth during the login switch "puts more pressure on user monetization," CNBC reported. Several analysts downgraded the stock.

What it means for the open web and AI's data suppliers

Reddit is on both sides of this trade. It sells access to its posts to AI companies: OpenAI agreed to access Reddit's Data API under a partnership announced in May 2024, and the 10-Q describes content licensing revenue recognized over each license period. Reported within other revenue, that line was $48 million in the quarter, up 35%, or 5.4% of revenue by SaasBuzz's calculation. Over nine months other revenue grew 25%, against 60% for the company as a whole. The 10-Q warns that "the value of content for AI training purposes may be reduced over time."

Advertising, 95% of revenue, depends on people visiting. So the same AI shift that makes Reddit's corpus worth licensing is, by Reddit's own account, also sending it fewer of the visitors who earn the rest. That is why the login wall matters beyond Reddit: a site that closes its pages to logged-out readers can also close them to crawlers, in the same week Google, Microsoft, OpenAI and Anthropic backed one shared opt-out from AI training. Google's parent had its own worst day a day earlier, as Search growth slowed to 12%.

For software companies that count on organic search for sign-ups, Reddit's disclosure is a rare hard number on what AI answers are doing to the clicks search used to send. What to watch next: whether Reddit's fourth-quarter daily uniques fall as far as it warned, and whether the logged-in test outside the US grows logged-in users faster than it loses the rest.