Reddit’s stock plunged more than 15% on Wednesday after the company reported weaker-than-expected user growth in its fourth-quarter earnings. Despite exceeding profit and revenue expectations, the shortfall in user numbers disappointed investors.
The social media platform posted earnings per share of 36 cents, surpassing the 25 cents projected by analysts, while revenue climbed to $428 million, beating the $405 million estimate. However, its global daily active uniques (DAUq) reached 101.7 million, falling short of Wall Street’s 103.1 million projection.
Reddit attributed the user miss to volatility caused by a Google search algorithm change, which CEO Steve Huffman described as routine in a shareholder letter. “What happened wasn’t unusual—referrals from search fluctuate from time to time,” Huffman said, adding that Reddit has since recovered search-related traffic in Q1.
While global logged-in DAUq grew 27% to 46.1 million, the company has been focused on converting logged-out users, which rose 51% to 55.6 million, into account holders for better monetization.
Despite the user growth hiccup, Reddit’s sales surged 71% year over year, marking its fastest growth since 2022. The company also issued an optimistic forecast, projecting first-quarter revenue between $360 million and $370 million, ahead of analyst expectations.
Reddit, which went public in March at $34 per share, saw its stock soar over sixfold to $216.47 before Wednesday’s selloff. However, prior to the dip, it had gained 32% year-to-date.
The company’s earnings follow a series of strong results from digital advertising players, including Amazon, Google, Pinterest, and Meta, all of which reported double-digit ad revenue growth in Q4.
