Reddit's third-quarter earnings report revealed earnings per share of $1.40, surpassing expectations of $1.35, while revenue reached $895 million, slightly below the anticipated $878 million. Following the announcement, Reddit's shares fell over 11%.
CEO Steve Huffman attributed the need for user registration to a decline in search-referral traffic from Google, which has shifted its focus towards AI-driven content delivery, negatively affecting Reddit's user acquisition. Despite a year-over-year increase in daily active uniques (DAUq) to 130.3 million, this figure fell short of Wall Street's estimate of 133.7 million, with U.S.
DAUq declining 2% to 50.7 million. Reddit's revenue guidance for the fourth quarter is projected between $1 billion and $1.03 billion, below the $1.05 billion expected by analysts. Huffman emphasized that the majority of Reddit's revenue comes from logged-in users, who are more valuable to advertisers.
The company also reported a 53% year-over-year revenue growth for the third quarter, marking a slowdown from previous quarters. Additionally, Reddit's average revenue per user (ARPU) was $6.87, exceeding the $6.50 forecast. Huffman noted ongoing negotiations with Google regarding data-licensing agreements, indicating a careful approach to partnerships that align with Reddit's strategic interests.
The planned login requirement is seen as a necessary evolution in response to changing internet dynamics, although it represents a departure from Reddit's historically open access model