What happened?
Shares of online community and discussion platform Reddit (NYSE:RDDT) fell 25.2% in the morning session after the company reported third-quarter 2026 financial results and issued fourth-quarter guidance that fell below Wall Street’s estimates.
According to a company press release, Reddit reported third-quarter 2026 revenue of $895 million, up 53% year on year, and diluted earnings per share of $1.40. Both figures exceeded Wall Street expectations, topping consensus analyst estimates of $877.2 million in revenue and $1.33 in earnings per share. However, forward-looking guidance dampened investor sentiment. Reddit projected fourth-quarter 2026 revenue between $1 billion and $1.03 billion and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) between $480 million and $510 million. At the midpoints of $1.02 billion and $495 million, respectively, both revenue and adjusted EBITDA guidance missed consensus estimates of $1.04 billion and $509.4 million. In addition, domestic daily active visitors fell by 900,000 year on year to 50.7 million, raising concerns over domestic user traction.
On the earnings call, CEO Steve Huffman attributed user softness to search referral traffic dropping by over 1 million weekly visits in October as Google expands AI Overviews, warning that fourth-quarter daily active uniques could drop by a low-double-digit percentage. Huffman noted that logged-in and mobile app users generate over 80% of monetization, prompting tests to shift toward a logged-in-only platform.
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What is the market telling us
Reddit’s shares are extremely volatile and have had 57 moves greater than 5% over the last year. But moves this big are rare even for Reddit and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 18 days ago when the stock dropped 3.6% on the news that rising benchmark Treasury yields and profit-taking across communication services pressured high-valuation growth equities ahead of key inflation data.
The U.S. 10-year Treasury yield climbed four basis points to 5.27%, lifting discount rates across long-duration equities. Communication services lagged the broader market with a 1.5% morning drop, as Reddit slid toward an intraday low of $151.42 after opening near $160.90.The decline halted a multi-day advance after Needham analyst Laura Martin reaffirmed a Buy rating and a $300 price target in research carried by Tipranks.
