Reddit Stock Slides Amid Google Search Traffic, User Growth Concerns

Reddit's Q1 revenue beat expectations at $392mln, a 61% YoY increase, driven by strong advertising sales. Daily active users reached 108mln, ahead of analysts' projection. However, the stock slid 6% as investors weighed concerns over user growth and changes to Google's search algorithm, which accounts for 40-50% of Reddit's traffic.

Reddit Inc. (RDDT) reported first-quarter earnings that exceeded Wall Street expectations, with revenue climbing 61% year-over-year to $392 million [1]. The company's daily active users (DAUs) reached 108 million, surpassing analysts' projections of 107.3 million [4]. However, the stock slid 6% in premarket trading as investors weighed concerns over user growth and changes to Google's search algorithm.

Reddit's CEO Steve Huffman highlighted the company's ability to navigate challenging macro environments, stating, "Ever-shifting macro environments like these create both challenges and opportunities. We’re well-positioned to meet this moment" [1]. The company's second-quarter sales are expected to range between $410 million and $430 million, ahead of Wall Street projections of $396 million [1].

Reddit's international DAUs grew 41% to 58 million, outpacing the U.S. where DAUs grew 21% to 50.1 million [4]. The company has extended its machine translation tools to 13 languages, up from 8 in the previous quarter, driving international growth [3]. Reddit's CFO Drew Vollero noted that the company has ample opportunity to grow its U.S. user base, citing the example of major platforms like Meta Platforms Inc.'s (META) Facebook that have over 100 million U.S. daily active unique users [4].

Reddit's revenue growth was driven by strong advertising sales, with the company focusing on site updates and features intended to convert logged-out users into logged-in users, which are more valuable to advertisers [3]. However, the company remains heavily reliant on Google traffic for its non-logged-in visitors, which accounts for 40-50% of its traffic [4].

In summary, Reddit's Q1 earnings report showed strong revenue growth and user expansion, but investors remain cautious about the company's ability to sustain this growth and adapt to changes in Google's search algorithm.

References:
[1] https://www.cnbc.com/2025/05/01/reddit-rddt-q1-2025.html
[2] https://www.nasdaq.com/articles/pearson-q1-underlying-group-sales-1
[3] https://www.socialmediatoday.com/news/reddit-adds-users-revenue-q1-2025/746960/
[4] https://www.morningstar.com/news/marketwatch/20250502169/this-is-why-reddits-stock-is-rising-after-earnings