Key Highlights

  • RDDT shares trading down 25.44% to $96.63, from a prior close near $129.60.
  • Third-quarter Revenue rose 53% to $895 million, with Net Income of $283 million.
  • Daily active uniques reached 130.3 million, up 12%, while U.S. users fell 2%.
  • Search referrals fell by over 1 million per week on average in October.
  • Fourth-quarter revenue guidance is $1.00 billion to $1.03 billion.

Strong Third-Quarter Numbers Meet a Sharp Search Referral Warning

Reddit (NYSE:RDDT) shares are trading down 25.44% today at $96.63, from a prior close of roughly $129.60, following the release of third-quarter results on October 29. Revenue rose 53% to $895 million, Advertising revenue grew 54% to $847 million, and net income climbed 74% to $283 million, or $1.40 per diluted share. The prior-year quarter produced net income of $163 million.

The most notable item in the report was a warning on traffic. Management said search referrals fell meaningfully in the quarter, with the decline accelerating late, and that they dropped by more than 1 million per week on average in October. If that trend persists, total daily active uniques could decline by a low-double-digit percentage in the fourth quarter from the current base of about 130 million.

Management added that the effects of weaker search referrals were felt most by logged-out and web users, though some spilled over to logged-in and app users.

User Growth Is Slowing in the U.S. While Logged-In Shift Is Planned

Daily active uniques reached 130.3 million, up 12% from a year earlier, and weekly active uniques rose 16% to 515.2 million. International daily users grew 24%, but U.S. daily users declined 2%. Logged-in daily users totaled 53.5 million, up 7%, with the U.S. logged-in group up just 1%.

Reddit said it plans to move toward a primarily logged-in experience, citing better ad-targeting signals, higher engagement and protection of its data. Full tests begin in the fourth quarter in select markets outside the U.S., and results will guide any wider rollout. Reddit has said the shift is intended to strengthen its data position.

Advertising growth came from higher pricing and impressions, and video ad revenue more than doubled from a year earlier.

Margins, Cash and the $100 Million Buyback at Much Higher Prices

Adjusted EBITDA rose 70% to $402 million, a Margin of 44.9%, and global average revenue per user climbed 36% to $6.87. Reddit ended the quarter with about $3.03 billion in cash and marketable securities. Revenue grew about 1.3 times faster than adjusted costs, a sign of the Operating Leverage behind the wide margin.

During the quarter the company repurchased roughly 670,000 Class A shares for $100 million, at an average of $149.81 per share. Today's price is about 35% below that level. Reddit also joined the S&P 500 during the quarter.

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

Search Referral Trend and Fourth-Quarter User Count Decide Reddit's Next Chapter

Reddit's financial results were strong, yet today's drop shows how heavily the stock is tied to user traffic. The key items to watch are whether October's weekly search referral losses ease or deepen, how the early logged-in tests perform outside the U.S., and whether fourth-quarter daily users land near the 130 million base. The company's next Quarterly Report will show how the guidance held up. Investors will also follow how quickly the U.S. user base, which declined 2%, stabilizes.