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Reddit faces rising Google search referral declines, threatening fourth-quarter daily active user trends.
RDDT plans to test a primarily logged-in experience in select international markets to deepen user engagement.
Reddit's Q3 ad revenues jumped 54% to $847 million, while Q4 revenue guidance signals 38???42% annual growth.
Reddit, Inc. (RDDT - Free Report) outlined plans to strengthen direct user engagement and reduce dependence on search referrals during its third-quarter 2026 earnings call. Management highlighted accelerating traffic declines from Google even as advertising demand and monetization remained strong.
The company is preparing to test a primarily logged-in experience while investing in personalization, user retention and advertising automation. Executives also addressed the implications of AI-powered search for Reddit's audience growth and long-term business model.
Reddit Faces Growing Search Referral Headwinds
CEO Steve Huffman said search referral traffic declined significantly during the third quarter, with deterioration accelerating toward September. The impact was concentrated in logged-out and web users, although some weakness extended to logged-in and app engagement.
The pressure continued into October, when average weekly search referrals declined by more than 1 million. Huffman warned that sustained trends could drive a low-double-digit sequential percentage decline in total daily active uniques during the fourth quarter.
During questioning from Raymond James, Huffman identified Google's AI Overviews and AI Mode as major contributors. He also cited potentially lower search rankings for machine-translated content, particularly internationally. Management emphasized strengthening Reddit's direct audience rather than depending on a recovery in referral traffic.
RDDT Plans Transition to Logged-In Experience
Huffman confirmed that Reddit intends to transition toward a primarily logged-in platform, with initial testing scheduled for select international markets during the fourth quarter.
The initiative aims to improve personalization, deepen engagement, strengthen advertising targeting and protect Reddit's content from unauthorized scraping. Logged-in and app users account for more than 80% of platform monetization.
Responding to questions from Deutsche Bank and Jefferies, Huffman acknowledged potential trade-offs between audience reach and engagement. Management will evaluate conversion rates and determine where login requirements should apply before implementing the broader transition.
Reddit Sees Advertising Momentum Despite Traffic Risks
COO Jennifer Wong highlighted continued advertiser demand, supported by stronger campaign performance and automation. Advertising revenues increased 54% year over year to $847 million.
Click volume grew more than 50%, while conversion volume more than tripled. Scaled advertising revenues increased more than 80%, reflecting higher spending from existing customers and advertiser acquisition.
Reddit Max entered public beta during the quarter, with advertiser adoption more than tripling sequentially. Wong also highlighted strength in shopping and app-install campaigns, both of which recorded revenue growth exceeding 95%.
RDDT Earnings and Revenues Beat Estimates
Reddit reported third-quarter earnings of $1.40 per share, exceeding the Zacks Consensus Estimate of $1.31 by 6.90%. Earnings increased 75% from 80 cents in the year-ago quarter.
Quarterly revenues reached $895 million, surpassing the Zacks Consensus Estimate of $886.5 million by 1%. Revenues increased 53% year over year, supported by advertising growth and improved monetization.
CFO Andrew Vollero reported a 91.5% gross margin and a 44.9% adjusted EBITDA margin. Adjusted EBITDA increased 70% to $402 million, while free cash flow reached $363 million, reflecting continued operating leverage.
Reddit Targets Strong Fourth-Quarter Growth
Vollero projected fourth-quarter revenues between $1 billion and $1.03 billion, representing year-over-year growth of 38% to 42%.
Adjusted EBITDA is expected between $480 million and $510 million, implying approximately 49% margin at the midpoint.
Management's outlook accompanies efforts to improve user retention and advertising efficiency. Huffman highlighted feed personalization and product improvements intended to make Reddit a more consistent daily destination.
RDDT Management Prioritizes Engagement and Monetization
Management maintained confidence in Reddit's monetization opportunity while acknowledging uncertainty surrounding search-driven traffic.
Huffman emphasized product improvements, community participation and direct audience relationships as priorities. Wong highlighted advertiser outcomes and growing performance-based demand.
The company's direction centers on strengthening higher-value users while testing changes that could reshape audience composition and engagement.
Reddit's Zacks Rank and Style Scores Signal Potential
Its Growth Score of A and Momentum Score of A highlight attractive growth and price momentum characteristics, while its Value Score of D indicates less favorable valuation characteristics.
The stock's VGM Score of B reflects a favorable combination of growth, value and momentum factors. This complements its Zacks Rank of 2, although the weaker Value Score warrants consideration. The Zacks Rank may change as analysts revise their earnings estimates following the third-quarter results.
View the Zacks #1 Rank List
Image: Bigstock
RDDT Q3 Earnings Call Highlights Search Traffic Pressures
Key Takeaways
Reddit, Inc. (RDDT - Free Report) outlined plans to strengthen direct user engagement and reduce dependence on search referrals during its third-quarter 2026 earnings call. Management highlighted accelerating traffic declines from Google even as advertising demand and monetization remained strong.
The company is preparing to test a primarily logged-in experience while investing in personalization, user retention and advertising automation. Executives also addressed the implications of AI-powered search for Reddit's audience growth and long-term business model.
Reddit Faces Growing Search Referral Headwinds
CEO Steve Huffman said search referral traffic declined significantly during the third quarter, with deterioration accelerating toward September. The impact was concentrated in logged-out and web users, although some weakness extended to logged-in and app engagement.
The pressure continued into October, when average weekly search referrals declined by more than 1 million. Huffman warned that sustained trends could drive a low-double-digit sequential percentage decline in total daily active uniques during the fourth quarter.
During questioning from Raymond James, Huffman identified Google's AI Overviews and AI Mode as major contributors. He also cited potentially lower search rankings for machine-translated content, particularly internationally. Management emphasized strengthening Reddit's direct audience rather than depending on a recovery in referral traffic.
RDDT Plans Transition to Logged-In Experience
Huffman confirmed that Reddit intends to transition toward a primarily logged-in platform, with initial testing scheduled for select international markets during the fourth quarter.
The initiative aims to improve personalization, deepen engagement, strengthen advertising targeting and protect Reddit's content from unauthorized scraping. Logged-in and app users account for more than 80% of platform monetization.
Responding to questions from Deutsche Bank and Jefferies, Huffman acknowledged potential trade-offs between audience reach and engagement. Management will evaluate conversion rates and determine where login requirements should apply before implementing the broader transition.
Reddit Sees Advertising Momentum Despite Traffic Risks
COO Jennifer Wong highlighted continued advertiser demand, supported by stronger campaign performance and automation. Advertising revenues increased 54% year over year to $847 million.
Click volume grew more than 50%, while conversion volume more than tripled. Scaled advertising revenues increased more than 80%, reflecting higher spending from existing customers and advertiser acquisition.
Reddit Max entered public beta during the quarter, with advertiser adoption more than tripling sequentially. Wong also highlighted strength in shopping and app-install campaigns, both of which recorded revenue growth exceeding 95%.
RDDT Earnings and Revenues Beat Estimates
Reddit reported third-quarter earnings of $1.40 per share, exceeding the Zacks Consensus Estimate of $1.31 by 6.90%. Earnings increased 75% from 80 cents in the year-ago quarter.
Reddit Inc. Price, Consensus and EPS Surprise
Reddit Inc. price-consensus-eps-surprise-chart | Reddit Inc. Quote
Quarterly revenues reached $895 million, surpassing the Zacks Consensus Estimate of $886.5 million by 1%. Revenues increased 53% year over year, supported by advertising growth and improved monetization.
CFO Andrew Vollero reported a 91.5% gross margin and a 44.9% adjusted EBITDA margin. Adjusted EBITDA increased 70% to $402 million, while free cash flow reached $363 million, reflecting continued operating leverage.
Reddit Targets Strong Fourth-Quarter Growth
Vollero projected fourth-quarter revenues between $1 billion and $1.03 billion, representing year-over-year growth of 38% to 42%.
Adjusted EBITDA is expected between $480 million and $510 million, implying approximately 49% margin at the midpoint.
Management's outlook accompanies efforts to improve user retention and advertising efficiency. Huffman highlighted feed personalization and product improvements intended to make Reddit a more consistent daily destination.
RDDT Management Prioritizes Engagement and Monetization
Management maintained confidence in Reddit's monetization opportunity while acknowledging uncertainty surrounding search-driven traffic.
Huffman emphasized product improvements, community participation and direct audience relationships as priorities. Wong highlighted advertiser outcomes and growing performance-based demand.
The company's direction centers on strengthening higher-value users while testing changes that could reshape audience composition and engagement.
Reddit's Zacks Rank and Style Scores Signal Potential
Reddit currently carries a Zacks Rank #2 (Buy), indicating favorable near-term earnings estimate revision characteristics.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its Growth Score of A and Momentum Score of A highlight attractive growth and price momentum characteristics, while its Value Score of D indicates less favorable valuation characteristics.
The stock's VGM Score of B reflects a favorable combination of growth, value and momentum factors. This complements its Zacks Rank of 2, although the weaker Value Score warrants consideration. The Zacks Rank may change as analysts revise their earnings estimates following the third-quarter results.