RDDT Stock Plunges on Google Search and AI Overviews Dependence

On February 12, 2025, Reddit reported Q4 2024 results that beat on revenue and earnings but missed on its key user metric. Global daily active unique visitors rose 39 percent year over year to 101.7 million, short of Wall Street's estimate of roughly 103.1 million, while revenue jumped 71 percent to $427.7 million and full-year 2024 revenue passed $1 billion for the first time. The user miss dominated the market reaction: the stock, which had risen more than sixfold from its March 2024 IPO price of $34, fell more than 15 percent in extended trading, closed down 5.3 percent the next day, and lost roughly 19 to 23 percent across February 2025.

CEO Steve Huffman attributed the shortfall to a Google search algorithm change late in Q4 that reduced how frequently Reddit appeared in search results. He told analysts such tweaks occur about twice a year, 'not the first, not the last,' and that this one primarily affected logged-out users in the United States before traffic recovered at the end of the quarter. The mechanics underscored Reddit's exposure: logged-out visitors, who largely arrive via Google search, grew 51 percent to 55.6 million, outpacing 27 percent growth in logged-in users. Huffman said the downturn had no revenue impact and noted it coincided with a rise in search queries that included the word 'Reddit.'

Analysts tied the change in part to Google's growing emphasis on AI Overviews, AI-generated summaries that answer queries before users click through to sites like Reddit. Wall Street split: Morgan Stanley's Brian Nowak urged investors to buy the dip, while Bank of America's Justin Post cited 'dependence on Google' among the reasons for his neutral rating. Reddit pointed to its hedge, Reddit Answers, a generative AI search product launched in December 2024.

The dependence question resurfaced at scale in 2026. On July 30, 2026, Reddit reported second-quarter revenue of $805 million, up 61 percent for an eighth consecutive quarter above 60 percent growth, with net income of $253 million and 130.3 million daily uniques — yet shares fell more than 20 percent because search referrals were 'choppy,' in Huffman's words. Huffman questioned AI Overviews directly, saying '10 blue links' had driven tremendous value while 'AI Overviews has yet to make a similar level of positive impact' and 'we're still looking for that win-win.' Reddit was reported to be considering ending its roughly $60 million licensing deal with Google, and a Pew Research study found AI Overviews cut referrals to sites by almost half, a conclusion Google disputed.

In his shareholder letter, Huffman positioned the company as 'the antidote to an automated web,' writing that 'people don't want a summary of Reddit; they want Reddit.' The episode became a defining example of AI search threatening traffic-dependent web businesses.