Reddit Shares Drop 15% as Google Algorithm Change Impacts Traffic

Reddit's stock tumbled 15% in extended trading after missing Q4 market estimates for daily active unique visitors. The decline was attributed to a Google algorithm update that affected how often the platform appeared in search results.

The San Francisco-based company, which went public in March 2024, saw its daily active unique visitors climb 39% year-over-year to 101.7 million, falling short of the 103.3 million analyst forecast. CEO Steve Huffman acknowledged volatility in search traffic due to the algorithm shift but noted a recovery in early 2025. The changes primarily impacted "logged-out users" browsing without signing in.

Despite the shortfall, Reddit posted strong financials. Q4 revenue surged 71% to $427.7 million, exceeding the $405.3 million estimate, driven by robust holiday ad spending. The company reported a profit per share of 36 cents, surpassing the expected 25 cents. Additionally, global average revenue per user rose 23% to $4.21.

Reddit continues to expand its AI-driven advertising initiatives, including data licensing deals with major tech firms like Google and OpenAI. Huffman hinted at ongoing discussions with industry leaders. The company's forecasted Q1 revenue of $360 million to $370 million also exceeded the market estimate of $358.1 million.

Analysts believe Reddit's international expansion and AI advancements could cement its position as a key digital advertising player. While search-driven traffic remains a concern, the company’s AI-powered ad strategy and growing user base suggest long-term potential.

Google has yet to comment on the algorithm changes.