Reddit shares plunge after Google algorithm change contributes to miss in user numbers
Reddit reported better-than-expected results, but the company issued disappointing user numbers.
Reddit shares fell more than 15% on Wednesday after the company reported weaker-than-expected user numbers in its fourth-quarter earnings.
Here's how the company did compared with LSEG estimates:
Earnings per share: 36 cents vs. 25 cents expected
Revenue: $428 million vs. $405 million expected
Global daily active uniques, or DAUq, rose 39% from a year earlier to an average of 101.7 million for the fourth quarter. That trailed Wall Street estimates of 103.1 million.
A Google search algorithm change caused some "volatility" with user growth in the fourth quarter, but the company's search-related traffic has since recovered in the first quarter, Reddit CEO Steve Huffman said in a letter to shareholders.
"What happened wasn't unusual — referrals from search fluctuate from time to time, and they primarily affect logged-out users," Huffman wrote. "Our teams have navigated numerous algorithm updates and did an excellent job adapting to these latest changes effectively."