Reddit's stock price plunged over 15% on Wednesday following the release of its fourth-quarter earnings report. Despite a significant year-over-year increase in daily active users, the company fell short of Wall Street's expectations. While a Google search algorithm change was cited as a contributing factor to the shortfalls, Reddit CEO Steve Huffman expressed confidence in the company's ability to recover and emphasized ongoing efforts to attract and convert logged-out users into more valuable logged-in users.
Reddit 's shares plummeted over 15% on Wednesday following the release of its fourth-quarter earnings report , which revealed user numbers falling short of market expectations. Despite a 39% year-over-year increase in global daily active uniques (DAUq) to an average of 101.7 million for the quarter, the figure trailed Wall Street's projected 103.1 million. Reddit CEO Steve Huffman attributed some of the volatility in user growth to a Google search algorithm update during the fourth quarter.
However, he emphasized that search-related traffic has since recovered in the first quarter. Huffman addressed the situation in a letter to shareholders, stating, 'What happened wasn't unusual — referrals from search fluctuate from time to time, and they primarily affect logged-out users. Our teams have navigated numerous algorithm updates and did an excellent job adapting to these latest changes effectively.' Reddit has been actively implementing internal site improvements aimed at attracting both new and returning users, categorized as logged-out users. The company recognizes the value of converting these logged-out users into logged-in users, which are more financially beneficial for its business. While missing the user number target, Reddit delivered a robust performance overall and provided a positive outlook for the future. Sales soared 71% in the quarter, reaching $250 million compared to the previous year, marking the fastest growth rate since 2022. The company anticipates first-quarter sales to fall between $360 million and $370 million, surpassing the average analyst estimate of $358 million. Net income surged almost fourfold to $71 million or 36 cents per share, up from $18.5 million, or breakeven on a per-share basis, in the previous year. Reddit reported adjusted earnings of $154 million for the fourth quarter, exceeding analysts' predictions of $128 million
Reddit Earnings Report User Growth Google Search Stock Price Daily Active Users
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