After closing at $129.60 during regular trading hours, the stock price fell to around $106.50 in after-hours trading.

Reddit Financial Reports Exceed Wall Street Expectations

Reddit announced third-quarter revenue of $895 million, a 53% increase from the same period last year, and higher than analysts' expectations of around $875 million to $878 million. Advertising revenue grew by 54% to $847 million; net profit increased by 74% to $283 million. Earnings per share reached $1.40, also significantly higher than Wall Street's forecasts.

The company also generated $363 million in free cash flow, which is nearly twice that of the same period last year.

However, despite these strong financial figures, Reddit's outlook for the fourth quarter disappointed investors. Management expects revenue to be between $1 billion and $1.03 billion, which is lower than analysts' forecast of around $1.04 billion.

Google AI searches raise concerns about the prospects of Reddit

One of the most concerning concerns comes from the comments made by CEO Steve Huffman about Google AI's search products. Huffman revealed that in October, there was a decrease of over 1 million weekly visits from Google Search. This has led the market to worry about how AI's generation of answers will affect Reddit's long-term traffic.

The AI Overviews and AI Mode of Google will provide the answers directly in the search results, which may reduce the need for users to visit external websites.

At the same time, the daily active users of Reddit increased by 12% year-on-year to reach 130.3 million, but this is still lower than the analysts' forecast of around 134 million. In the United States, the daily active users decreased by 2%.

Reddit What will happen next?

Reddit is exploring ways to reduce its dependence on Google, including testing login requirements in some international markets to encourage users to participate more directly in interactions.

Investors are also paying attention to the AI data authorization agreements of companies such as Reddit, Google, and OpenAI. As AI seeks to obtain human-generated content, these agreements may become very important.

Danielle Walgenbach

Danielle is a journalist who covers cryptocurrency and financial markets, with over four years of reporting experience. She is adept at breaking down complex financial and economic topics into clear, thoroughly researched reports.