Reddit (RDDT) shares plummeted as much as 18% in after-hours trading on Wednesday after the social media giant reported a mixed set of fourth-quarter earnings results that failed to meet investor expectations.
The company posted a significant 70% increase in revenue from the previous year, reaching $427.7 million, which exceeded Wall Street’s forecast of $405.5 million, according to Bloomberg consensus data. However, the platform’s diluted earnings per share came in at $0.36, falling short of analysts’ expectations of $0.48.
Additionally, Reddit reported 101.7 million daily active users in the December quarter, reflecting a nearly 40% increase from 2023. Despite the growth, the figure missed analysts’ expectations of 103.8 million users.
CEO Steve Huffman addressed analysts in a call on Wednesday evening, attributing some of the platform’s recent traffic volatility to a shift in Google Search’s algorithm late in the fourth quarter. Huffman assured investors that the platform had since regained momentum, stating, “Traffic from [Google] Search has recovered so far in Q1, and we’ve regained momentum.”
“We see volatility from Google all the time, as does everybody,” Huffman added. “So there’s zero concern from us in this department.”
The CEO also noted that the disruption primarily impacted “logged out users,” or those without Reddit accounts. The company is now focusing on converting these users into active account holders by enhancing the signup process and improving personalized home screens.
As part of its growth strategy, Reddit is also refining its internal AI-powered search tool, Reddit Answers, to increase user engagement and reduce reliance on external search engines like Google.
Despite the mixed earnings report, Reddit’s guidance for the first quarter of 2025 exceeded Wall Street expectations. The company projected revenue between $360 million and $370 million, surpassing analysts’ consensus estimate of $359 million. Reddit also expects to report adjusted earnings (before interest, taxes, depreciation, and amortization) between $80 million and $90 million, exceeding the anticipated $72 million.
Investors will be closely watching Reddit’s next steps as the company works to maintain growth and capitalize on its expanding user base.
By: Montana Newsroom staff
