Reddit shares experienced a sharp decline on Friday, dropping nearly 21 percent in the company's largest single-day fall since its public offering. The slide followed the company's latest financial report, which failed to provide news on new data licensing agreements. Investors have recently pinned much of the stock price on the potential for additional revenue from deals with artificial intelligence firms, hoping to capitalize on the platform's large database of user conversations.
While the company posted revenue of $804.9 million for the period, surpassing analyst estimates of $731.8 million, other metrics caused concern. US daily active user figures came in at 53.2 million, missing the expected target of 54 million. While total daily active users saw 18 percent growth to 130.3 million, the shortfall in the domestic market weighed heavily on investor sentiment.
CEO Steve Huffman addressed the lack of new agreements during the earnings discussion. He emphasized that current AI deals are not binary and that management evaluates opportunities based on long-term value for the business. The company maintains existing high-profile partnerships with Google and OpenAI, which serve as foundational data licensing assets.
Beyond licensing, leadership noted broader challenges in the digital market. Search referrals were volatile throughout the quarter, and company visibility regarding these referral sources remains low. Huffman indicated that the company expects this volatility to continue as AI tools change the way users discover and access online content. The firm continues to lean on its advertising business as its primary revenue driver while navigating these shifting digital landscapes.