Oct 30, 2026: a gap down on the user warning
Premarket trading ranged from a high of $106.79 near 7:20am to a low of $97.60 at 9:25am. It opened the regular session at $100.25 and fell to $95.45 by 9:35am, down 26.3% from the prior close. It was $97.56 at 9:44am on 6.3 million shares, already above its 20-day average of 4.9 million.
What happened:
- Revenue and profit beat. Revenue was $895 million, up 53%, against about $878.4 million expected. Net income was $283 million, up 74%, or $1.40 per diluted share, and adjusted EBITDA was $402 million, up 70%. Advertising revenue was $847 million, up 54%, and other revenue, which includes data licensing, was $48 million, up 35%, TechCrunch and 24/7 Wall St. reported.
- The users did not. U.S. daily active uniques fell from 53.2 million in the second quarter to 50.7 million, down 2% from a year earlier and the first U.S. drop since the 2024 IPO. International users rose 24% to 79.6 million, so the total held at 130.3 million. The Motley Fool noted that a U.S. user earns $13.82 a quarter against $2.43 for an international user.
- Google is the cause. Search referrals fell by more than 1 million a week on average in October as AI search answers more questions on the results page. CEO Steve Huffman said Reddit will move to a mainly logged-in experience, with a test in select markets outside the U.S. in the fourth quarter. "This is a test, but we are going to make this transition," he said.
- Guidance fell short on profit. Fourth-quarter adjusted EBITDA guidance of $480 million to $510 million sits below the $512.2 million estimate, while revenue guidance is $1.00 billion to $1.03 billion.
From the Oct 29 close, at 9:44am:
| Stock or fund | Oct 29 close | Oct 30, 9:44am | Change |
|---|---|---|---|
| Reddit (RDDT) | $129.60 | $97.56 | -24.7% |
| Snap (SNAP) | $5.68 | $5.28 | -7.0% |
| Pinterest (PINS) | $19.92 | $18.71 | -6.1% |
| Invesco QQQ (QQQ) | $715.34 | $695.79 | -2.7% |
| Meta (META) | $624.52 | $615.35 | -1.5% |
| Alphabet (GOOGL) | $283.82 | $280.72 | -1.1% |
| Communication Services fund (XLC) | $101.21 | $100.16 | -1.0% |
Reddit fell about 25 times as far as the sector fund. Pinterest and Snap dropped in sympathy, and Reuters said Pinterest also forecast weak fourth-quarter revenue, but neither came close to Reddit's loss. Alphabet itself fell 12.64% on Oct 29 after its own earnings, to $283.82, so the group is under pressure beyond Reddit's own news. More of the day's swings are in today's biggest stock moves.
After the drop, RSI(14) stood at 19, the shares sat 35% below their 50-day average and 39% below their 200-day average, volume ran 1.3 times its 20-day average with the session barely open, and the stock was 63% below its 52-week high of $263.50.
What the numbers say
The quarter was strong by any usual measure. Revenue grew 53%, net income 74% and adjusted EBITDA 70%, and Reddit bought back $100 million of stock at an average of $149.81, the Motley Fool reported. At $97.56 that repurchase is already 35% under water. The fourth-quarter revenue guide of $1.00 billion to $1.03 billion would put sales above $1 billion for a quarter.
Annualizing the third-quarter net income of $283 million gives about $1.13 billion, and the alert's $18.6 billion market value is about 16 times that. A company growing profit 74% at that multiple has been priced for a lasting loss of users, not a slowdown. Our explainer on forward and trailing P/E shows why the multiple depends on which earnings you trust.
The bull case
- The people leaving pay the least. Logged-in users drive more than 80% of monetization, per 24/7 Wall St., and logged-in U.S. users grew 1% while logged-out U.S. users fell 4%.
- Pricing power is intact. U.S. revenue per user rose 53% to $13.82 and global revenue per user rose 36% to $6.87.
- The login wall serves the ad business. Logged-in users give more signals for ad targeting, and the plan also protects the data Reddit licenses to AI companies, TechCrunch reported.
- The guide is conservative on its face. Fourth-quarter revenue of $1.00 billion to $1.03 billion is still a large step up from $895 million, and the EBITDA miss against the estimate is about 6% at the low end.
- Sentiment is washed out. The stock is down more than 60% from its high. The consensus price target in the data we checked was $202.86, with a low of $142 and a high of $265, though those figures may not yet reflect today's cuts.
The risks
- A structural traffic loss. Referrals fell by more than 1 million a week in October, and management warned of a low double-digit drop in daily users in the fourth quarter. Our guide to why outlooks move stocks explains why a warning like this can outweigh a beat.
- The login test may cost reach. Requiring sign-in could push away casual visitors before it pays off in ad targeting, and Reddit has given no date for a worldwide change.
- Growth is overseas. All of the net user growth this year came from outside the U.S., where a user earns less than one-fifth as much.
- Estimates will fall. Analysts are cutting forecasts after the report, as Benzinga reported. Our piece on earnings estimate revisions covers how that drift can keep pressure on a stock after the first day.
- A gap this size can extend. Our note on base rates covers why a sharp first-day drop says little about the next month.
What comes next
The next dated checkpoint is the end of the fourth quarter on December 31, 2026, with results to follow. Before then, watch the weekly search-referral pace, the first read from the logged-in test outside the U.S., and whether the pressure spreads to other ad platforms such as Meta. The test of the Bullish view is whether logged-in users keep growing while the logged-out audience shrinks.