Reddit Shares Fall More Than 23% After User Growth Miss

Reddit shares were down more than 23% in premarket trading by 4:39 a.m. ET Friday after the company’s third-quarter user growth missed analyst estimates, putting its conditional fourth-quarter audience warning in focus.

Reddit averaged 130.3 million global daily active uniques (DAUq) in the quarter ended Sept. 30, up 12% year over year but below the 133.36 million average estimate from six analysts. The company defines a DAUq as a user with a unique identifier who visits its site or opens its app at least once in a 24-hour period. U.S. DAUq fell 2% year over year to 50.7 million, while international DAUq rose 24% to 79.6 million.

In an Oct. 29 shareholder letter, Reddit said search traffic declined by more than 1 million referrals per week on average during October. The company warned Q4 DAUq could fall by a percentage in the low double digits from a base of 130 million if search referrals kept declining at that rate. Referral counts measure visits from search, not unique users lost.

Q3 revenue increased 53% to $895 million, and diluted earnings were $1.40 per share. Reddit forecast Q4 revenue of $1 billion to $1.03 billion, below the $1.05 billion analyst consensus.