Reddit just delivered a masterclass in mixed signals. The social platform crushed Q3 expectations with 68% revenue growth and a stellar forecast, sending shares up 2% after hours. But buried in the earnings call was a troubling trend - US logged-in user growth hit its slowest pace in five consecutive quarters, raising questions about whether Google's AI features are reshaping how people find and consume Reddit content.
Reddit delivered a earnings beat that tells two very different stories about the platform's trajectory. The company posted Q3 revenue of $585 million - a massive 68% jump year-over-year that sailed past Wall Street's $546 million estimate. Net income hit $163 million, marking a 23% increase from last year's $133 million.
The numbers that really matter to investors paint an optimistic picture. Global average revenue per user climbed to $5.04, beating analyst estimates of $4.82. US revenue - Reddit's cash cow - came in at $480 million, crushing StreetAccount's $445 million projection. Even international sales of $105 million slightly topped the $104 million forecast.
But here's where the story gets complicated. Reddit's US logged-in daily active users - the ones who actually create accounts and generate the most ad revenue - grew just 7% year-over-year to 23.1 million. That's a sharp deceleration from the 12% growth the company posted last quarter, and it marks the fifth consecutive quarter of slowing growth in this critical metric.
The timing isn't coincidental. Google has been aggressively rolling out AI Overview features that summarize search results, potentially reducing the need for users to click through to Reddit threads. Since Reddit makes significantly more money from logged-in users who see more targeted ads, this shift could signal a fundamental challenge to the platform's growth model.
"Reddit has seen a wave of users come to its platform from Google," according to CNBC's earnings coverage, "and the social media company makes more advertising-related money from users who create accounts." If Google's AI features are satisfying user queries without driving account creation, that's a problem for Reddit's long-term monetization.
The contrast becomes even starker when you look at logged-out users. Global logged-out daily actives jumped 24% to 65.8 million, while global logged-in users grew just 14% to 50.2 million. People are clearly finding Reddit content - they're just not sticking around to engage deeply with the platform.
Reddit's data licensing business, part of its "Other revenue" category, offers some diversification hope. That segment grew 7% year-over-year to $36 million, benefiting from the company's deals with AI training companies. But at just 6% of total revenue, it's nowhere near large enough to offset advertising headwinds.
