A record quarter, and a warning in the same letter

Reddit's third quarter was, on the financial lines, the strongest in its history. Revenue reached $895 million, up 53% from a year earlier and above the top of the range the company had guided to in July. Advertising produced $847 million of it. Net income was $283 million, and the company noted that trailing twelve-month revenue has passed $3 billion.

The shareholder letter then spends real space on a problem those numbers do not show. Search referral traffic, the visitors who arrive by clicking a Reddit result in a search engine, "was down meaningfully in Q3, with the decline accelerating later in the quarter." October was worse: referrals down by more than 1 million a week on average. If that rate continues, Reddit told investors, its daily active uniques could fall in the fourth quarter by a low-double-digit percentage from a base of 130 million. At the bottom of that range, a 10% fall would leave roughly 117 million daily users, about where Reddit stood a year ago. That arithmetic is ours, from the company's figures. Reddit gave no user guidance beyond the warning itself.

The audience split shows where the pressure is most visible. Logged-out daily users fell from 77.7 million in Q2 to 76.8 million in Q3, while logged-in users increased from 52.6 million to 53.5 million. Those changes offset each other, leaving total DAUq flat at 130.3 million. Reddit says the largest impact has been on logged-out and web traffic, although some of the referral decline also reaches logged-in and app users.

The letter names no culprit. The call did.

Read the letter closely and one absence stands out. It does not name a search engine. It does not say AI answers caused the decline, and it does not blame a ranking change. It frames the shift in general terms: "Web search is evolving from a gateway to the web to becoming an AI-powered destination itself."

The attribution came later, and verbally. On the post-earnings call, chief executive Steve Huffman described Reddit's explanation as a two-part hypothesis. The main factor, he said, was Google's expansion of AI Mode and AI Overviews, which push conventional results further down the page and do not send visitors to Reddit in the way traditional search results did. A second factor, he said, was that Reddit believed its machine-translated content was being ranked lower, particularly outside the United States. Huffman said Google was still crawling Reddit heavily, but that AI Mode was not driving traffic. These are Reddit's explanations for its own referral data, not independently established findings about Google's systems.

"Google is crawling us as hard as ever, so the demand hasn't changed from their point of view either. The reality is, the AI mode does not drive traffic, not for us and not to anybody," he said. No Google response appears in the reporting checked for this piece, and the claim that AI answers are the cause is, at this point, Reddit's account of its own traffic. It is a plausible account, and Reddit is unusually well placed to see its own referral data. It is not yet an independently established cause.

Why Reddit can warn of fewer users and still guide revenue up

The response Reddit announced is a change to what the site is. In Q4 it will begin fully testing a primarily logged-in experience in select markets outside the United States, with the results informing a global version. The business case is stated plainly in the letter: logged-in users give Reddit more signals for ad targeting and engage more, while app and logged-in users together account for over 80% of monetization. That helps explain why Reddit believes it can absorb some loss of search-driven visitors without an equivalent decline in revenue. It does not establish how much revenue the departing logged-out audience generates.

That is how a company can warn of a double-digit fall in daily users in the same letter that guides fourth-quarter revenue to roughly 40% growth, at $1.00 billion to $1.03 billion. That range was below the approximately $1.05 billion consensus cited in some market reports, although Reuters described it as largely in line with analyst expectations.

Investors priced the user warning, not the record quarter. The shares closed regular trading down 3.8% at $129.60. In extended trading, they were down approximately 18%, at roughly $106, as of 8 p.m. ET on October 29.

For anyone who publishes on the open web, Reddit's letter is the most concrete version yet of a complaint usually made without numbers. A site this large, with content Google and OpenAI both license, is reporting a measurable weekly referral loss, putting a possible double-digit user decline in an SEC-filed letter, and redesigning access to its own pages in response. Whether the cause is AI answers, ranking changes, or both, the direction of the bargain is now in writing: Huffman says Google is crawling Reddit as hard as ever, while sending fewer visitors back.

Sources

  1. [1] Reddit, "Reddit Reports Third Quarter 2026 Results", October 29, 2026 (primary source, read in full): revenue of $895 million, up 53% year over year; advertising revenue of $847 million, up 54%; net income of $283 million; diluted EPS of $1.40; adjusted EBITDA of $402 million; DAUq of 130.3 million, up 12% year over year; fourth-quarter guidance of $1,000 million to $1,030 million in revenue and $480 million to $510 million in adjusted EBITDA; and Huffman's statement that trailing twelve-month revenue has passed $3 billionRead source
  2. [2] Reddit, Q3 2026 shareholder letter, October 29, 2026 (primary document; filed with the SEC as Exhibit 99.2 to Reddit's Form 8-K of October 29, 2026, and posted on Reddit's investor relations website; read in full): the search-referral passages quoted in this article, including "down meaningfully in Q3, with the decline accelerating later in the quarter" and October's drop of more than 1 million referrals on average per week; the conditional warning that total DAUqs could fall in Q4 by a low-double-digit percentage from the current base of 130 million; the logged-out (76.8 million) and logged-in (53.5 million) audience split and its Q2 comparatives (77.7 million and 52.6 million); app and logged-in users as over 80% of monetization; and the Q4 test of a primarily logged-in experience in select markets outside the U.S.Read source
  3. [3] Reuters, October 29, 2026 (read via syndication): Huffman's blame of Google's AI search features on the post-earnings call, including "Google is crawling us as hard as ever" and "the AI mode does not drive traffic, not for us and not to anybody"; U.S. DAUq down 2% to 50.7 million, its first decline since Reddit went public in 2024; shares down 18% in extended trading; the fourth-quarter revenue forecast described as largely in line with estimates; and third-quarter revenue of $895 million against the $878.4 million LSEG-compiled estimateRead source
  4. [4] CNBC comments by Huffman and LSEG-compiled analyst estimates, as reported by Stocktwits / TradingView, October 29, 2026: fourth-quarter guidance of $1.00 billion to $1.03 billion against about $1.05 billion expected, and adjusted EBITDA guidance of $480 million to $510 millionRead source
  5. [5] PPC Land, detailed reading of the shareholder letter, October 29, 2026: the letter's audience tables, including U.S. weekly active uniques flat on the year, and the July guidance range of $860 million to $870 million that third-quarter revenue clearedRead source
  6. [6] AI Stock Wire, October 29, 2026: the extended-trading price of about $106 as of 8 p.m. ET, down about 18%, and the regular-session close of $129.60, down 3.8%Read source