Reddit Shares Sink 8% Amid Tech Selloff and Growing Google AI Search Pressure

Reddit shares dropped 8% on Thursday as a broader market slide across technology equities intersected with investor concern over digital advertising demand and declining search referrals.

The downturn followed disappointing third-quarter numbers from Snap, which renewed worries about an advertising slowdown for mid-tier digital platforms. But Reddit faces an additional platform risk: search referral volume has weakened as Alphabet expands automated artificial intelligence answers within Google Search, constraining one of Reddit's primary organic audience pipelines.

According to reporting and financial analysis published by [Yahoo Finance](https://www.tikr.com/blog/reddit-sinks-8-as-social-ad-worries-deepen-in-tech-rout?ref=yahoofinance&tlnk=yf-261105-whpgc2qp&.tsrc=rss), the social media sector showed stark divergence following Snap's earnings update. Snap's advertising revenue rose just 4% in the third quarter, with chief executive Evan Spiegel acknowledging on an earnings call that "advertising revenue growth remains below our ambitions" as consumer packaged goods companies reduced marketing spend.

That pullback has not affected the largest digital ad platform. Meta Platforms delivered a 26% revenue surge in its third quarter to $64.6 billion and issued fourth-quarter guidance of $73 billion to $76 billion, signaling resilient advertising appetite among major platforms.

Reddit's top-line revenue expansion has also remained rapid. The company generated $895 million in third-quarter revenue, representing a 53% increase year over year. However, Reddit shares were already vulnerable following soft fourth-quarter revenue guidance between $1.00 billion and $1.03 billion, which trailed analyst forecasts even though it translates to implied growth of 38% to 42%.

Reddit chief executive Steve Huffman pointed to Google's rollout of AI Overviews and AI Mode in Google Search as a major factor behind the decline in referral traffic, as generative summaries resolve user queries directly without requiring visits to discussion threads. By contrast, Alphabet reported a 12% rise in third-quarter Search and other revenue to $63.4 billion, with chief executive Sundar Pichai highlighting five-year peak query growth.

The reduction in inbound traffic has prompted Wall Street analysts tracked by TIKR to trim medium-term projections, lowering Reddit's consensus 2027 revenue estimate from $4.47 billion in late October to $4.34 billion. The repricing has compressed Reddit's valuation to 11 times forward earnings, down from a 12-month average of 26 times and a high of 49 times set earlier in the year.

The next crucial indicator of Reddit's bargaining power in the artificial intelligence ecosystem will arrive in early 2027, when the company's data-licensing agreement with Google comes up for contract renewal.