Reddit shares drop as logged-in user growth in U.S. keeps slowing

In its latest earnings report, Reddit announced third-quarter results that exceeded expectations in both revenue and net income, despite a slowdown in logged-in user growth. The company's shares fell approximately 4% by the end of the trading day. Reddit revealed that its global daily active users reached 116 million, marking a 19% increase compared to the same period last year, and surpassing analysts' predictions of 114 million. However, growth among logged-in users in the U.S., which is Reddit's most profitable market, only rose by 7% year-over-year to 23.1 million, a decline from the previous quarter's 12% increase. Despite the slowdown in user growth for logged-in accounts, Reddit saw a significant rise in overall engagement. The total global logged-in daily active users increased by 14% to 50.2 million, while logged-out users surged by 24% to 65.8 million. Investors are closely monitoring these metrics, especially as Google introduces new generative AI capabilities that could impact user acquisition and engagement on various platforms. The social media platform has benefited from users migrating from Google, as more registered users translate into higher advertising revenue. In the third quarter, Reddit's sales soared by 68% year-over-year, reaching $163 million, a notable rise from $133 million during the same quarter last year. Looking ahead, Reddit anticipates fourth-quarter sales of between $655 million and $665 million, exceeding Wall Street's forecast of $638 million. Additionally, the company expects its adjusted earnings for the fourth quarter to fall between $275 million and $285 million, surpassing analyst estimates of $259 million. Reddit's average revenue per user for the third quarter stood at $5.04, surpassing estimates of $4.82. In the U.S., revenue totaled $480 million, exceeding projections of $445 million, while international sales were reported at $105 million, slightly ahead of expectations. Furthermore, Reddit's 'Other revenue' segment, which encompasses its data licensing operations, experienced a 7% year-over-year growth, totaling $36 million. This performance comes in the wake of other tech giants like Google and Meta, which also reported strong earnings for the third quarter, highlighting a competitive landscape in the digital advertising market.