Reddit Shares Drop 30% After CEO Warns Google AI Mode Kills Traffic

Reddit shares plunged 30.44 percent to $90.15 on Friday following a warning from CEO Steve Huffman. Huffman stated that Google's AI Mode does not drive traffic for Reddit or anyone else. The company reported that Google search referrals fell by more than one million on average every week during October. This decline was attributed to AI Overviews and AI Mode.

Despite strong third-quarter results, the stock dropped over 25 percent. Reddit's third-quarter revenue climbed 53 percent year over year to $895 million. Diluted earnings per share came in at $1.40, up 75 percent from a year earlier. However, the company forecast fourth-quarter revenue of $1 billion to $1.03 billion, which was below analyst expectations.

Reddit plans to begin testing login changes in selected markets outside the U.S. during the fourth quarter. These measures aim to curb scraping and reduce dependence on the open web. The stock has lost 44 percent over the past week. Technical indicators show the 50-day average has fallen below the 200-day average, creating a bearish signal.