Reddit (RDDT) stock fell more than 5% Thursday after the company’s mixed fourth quarter earnings results posted late Wednesday failed to meet investors’ high expectations.
Reddit’s diluted earnings per share of $0.36 fell below analysts’ estimates of $0.48. Reddit’s daily active users in the December quarter hit 101.7 million, up nearly 40% from 2023 but less than the 103.8 million expected.
The social media platform’s fourth quarter revenue rose more than 70% from the prior year to $427.7 million, surpassing Wall Street’s forecast of $405.5 million, according to Bloomberg consensus data.
Shares of the company initially fell as much as 18% after the results.
CEO Steve Huffman said on a call with analysts Wednesday evening that the platform’s traffic had experienced “some volatility” due to a change in Google Search’s algorithm late in the fourth quarter. Huffman said that “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 told analysts, “So there’s zero concern from us in this department.”
Huffman added that the disruption affected “logged out users,” or those who do not have Reddit accounts. The CEO said the social media company is working to convert those users into active account holders by streamlining the signup process and improving their personalized home screens.
Reddit is also enhancing its internal AI-powered search tool, Reddit Answers, to attract users and encourage them to rely on it instead of Google Search.
Though Reddit’s fourth quarter earnings were mixed, its guidance for the first quarter came in ahead of analysts’ projections.
The platform said it expects revenue between $360 million and $370 million in the first quarter of 2025, more than the $359 million Wall Street analysts tracked by Bloomberg had forecast. Reddit anticipates that it will record adjusted earnings (before interest, taxes, depreciation, and amortization) of $80 million to $90 million, more than the $72 million expected by analysts.
Raymond James analyst Josh Beck called Thursday’s pullback in Reddit shares a “buying opportunity,” pointing to Reddit’s “sharp” recovery in traffic following the Google algorithm changes.
“While the report did not clear our anticipated bar, we walk away encouraged by international upside, ad progress and early positive response from [Reddit] Answers that likely is combined with Search to improve on-platform searchability,” Beck wrote in a note to investors late Wednesday.
