Reddit Q3 Earnings Beat, Warn On User Growth
Reddit Q3 earnings beat but management warned Google AI search cut referrals and could shrink users, prompting cautious Q4 guidance and ad pressure.
KEY TAKEAWAYS
- Revenue beat at $895 million and adjusted EPS was $1.40 per share.
- Management warned Google AI search reduced referrals and could shrink total users in Q4.
- Q4 revenue guidance was $1.00 billion-$1.03 billion with adjusted EBITDA $480 million-$510 million.
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Reddit reported stronger-than-expected third-quarter earnings on Oct. 29, 2026, but management said Google’s AI search features have significantly reduced referral traffic and warned total users could decline in the fourth quarter, prompting cautious guidance.
Quarter Results and Guidance
For the quarter ended Sept. 30, 2026, Reddit reported revenue of $895 million, up 53% year over year, exceeding the cited analyst estimate of $878.4 million. Adjusted earnings were $1.40 per diluted share, above the consensus of $1.33. Net income rose 74% to $283 million, while adjusted EBITDA, a proxy for operating profit, increased 70% to $402 million, representing a roughly 45% margin.
Advertising revenue accounted for $847 million, up 54% year over year, and other revenue, including data licensing, reached $48 million, a 35% increase. Weekly active unique users grew 16% to 515.2 million. Chief Financial Officer Drew Vollero said Reddit surpassed $3 billion in trailing-12-month revenue during the quarter.
For the quarter ending Dec. 31, 2026, Reddit set revenue guidance of $1.00 billion to $1.03 billion and adjusted EBITDA guidance of $480 million to $510 million. The midpoint of this guidance falls below cited analyst estimates. The company noted the outlook reflects current estimates and is not a guarantee of future performance.
Search Referrals and User Outlook
Reddit reported a material decline in search-referral traffic during Q3, with the drop accelerating near quarter-end and continuing into October, when referrals fell by more than 1 million per week on average. Management attributed the decline mainly to Google AI Overviews and AI Mode, which answer queries directly within Google, reducing click-through traffic to Reddit and other sites.
Global daily active unique users rose 12% year over year to 130.3 million. However, U.S. daily active uniques fell 2% to 50.7 million, marking Reddit’s first U.S. user decline since its 2024 initial public offering. The company warned that if referral declines persist, total daily active uniques could drop by a low-double-digit percentage in Q4 from roughly 130 million.
To counter traffic losses, Reddit plans to test a primarily logged-in user experience in selected non-U.S. markets during Q4. Management said logged-in users generate more than 80% of monetization. The logged-in experience initiative is a product and access-policy test, not a regulatory approval process. Reddit will also focus on logged-in and app audiences, user retention, and app adoption.
