Key Highlights

  • RDDT is down 25.44% at $96.63, compared with a prior close near $129.60.
  • Third-quarter Revenue increased 53% to $895 million, and Net Income reached $283 million.
  • Daily active uniques were 130.3 million, up 12%, but U.S. users slipped 2%.
  • Search referrals dropped by more than 1 million per week on average during October.
  • Fourth-quarter revenue guidance spans $1.00 billion to $1.03 billion.

Solid Third-Quarter Figures Collide With a Warning on Search Referrals

Reddit (NYSE:RDDT) shares are down 25.44% today at $96.63, from a prior close of about $129.60, after third-quarter results were published on October 29. Revenue increased 53% to $895 million, Advertising revenue grew 54% to $847 million, and net income rose 74% to $283 million, or $1.40 per diluted share. A year earlier, net income had been $163 million.

The item that dominated was the traffic warning. Management reported that search referrals weakened over the quarter, with the slide speeding up late in the period, and fell by more than 1 million per week on average in October. Should that pattern hold, total daily active uniques might drop by a low-double-digit percentage in the fourth quarter from the roughly 130 million base.

Management noted that logged-out and web users bore the brunt of weaker search traffic, while some of the effect reached logged-in and app users as well.

Logged-In Shift Advances as U.S. Daily Users Edge Lower

Daily active uniques reached 130.3 million, up 12% year over year, while weekly active uniques climbed 16% to 515.2 million. International daily users rose 24%, yet U.S. daily users fell 2%. Logged-in daily users totaled 53.5 million, up 7%, though the U.S. logged-in group grew just 1%.

Reddit intends to shift toward a mainly logged-in experience, pointing to stronger ad-targeting signals, higher engagement and better protection of its data. Full testing starts in the fourth quarter in select markets outside the U.S., and those results will shape any broader rollout. The company has described the move as a way to bolster its data position.

Ad growth came from higher pricing and more impressions, and video advertising revenue more than doubled year over year.

Operating Leverage, Cash Balance and a $100 Million Buyback Above Today's Price

Adjusted EBITDA jumped 70% to $402 million, a 44.9% margin, and global average revenue per user rose 36% to $6.87. Cash and marketable securities stood at about $3.03 billion at quarter end. Revenue expanded roughly 1.3 times faster than adjusted costs, which explains much of the wide margin.

During the quarter, the company bought back about 670,000 Class A shares for $100 million, averaging $149.81 per share. Today's price sits about 35% below that average. Reddit also joined the S&P 500 during the quarter.

For the fourth quarter, Reddit guided revenue to $1.00 billion to $1.03 billion and adjusted EBITDA to $480 million to $510 million.

Whether October's Referral Losses Ease Will Set Reddit's Next Move

Reddit's operating results were strong, but today's selloff shows how closely the share price follows user traffic. The points to monitor are whether October's weekly referral losses ease or worsen, how the early logged-in tests perform outside the U.S., and whether fourth-quarter daily users hold near the 130 million level. The next Quarterly Report will reveal whether guidance held. Investors will also watch how quickly the U.S. user base, which fell 2%, steadies.