--- title: "Reddit (RDDT) Is Losing Traffic to Google, but Its Business Is Holding Up" type: "News" locale: "en" url: "https://longbridge.com/en/news/304124641.md" description: "Reddit faces traffic decline due to Google's AI search results, causing a 60% stock drop in 2026. However, Q3 revenue grew 53% to $719 million with strong free cash flow of $934 million. Despite a slight Q4 guidance miss, the author rates RDDT a Buy, citing an attractive valuation of 3.3x projected 2027 revenue and robust monetization from engaged users." datetime: "2026-11-03T13:42:00.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/304124641.md) - [en](https://longbridge.com/en/news/304124641.md) - [zh-HK](https://longbridge.com/zh-HK/news/304124641.md) generator: "portal-rs" --- # Reddit (RDDT) Is Losing Traffic to Google, but Its Business Is Holding Up Reddit (RDDT) is losing visitors to Google (GOOGL). Its shareholders are losing much more. With answers generated by artificial intelligence (AI) appearing directly in search results, Reddit has seen its traffic decline and warned of a possible drop in users in Q4. Weaker-than-expected guidance has only made matters worse, with RDDT already down more than 60% in 2026. Still, Reddit’s business is holding up surprisingly well. Revenue grew 53% in Q3, posted on October 29, while free cash flow reached $934 million in the first nine months of the year. The San Francisco-based social media platform now trades at an enterprise value of just 3.3x projected 2027 revenue, making it an attractive opportunity to gradually start accumulating shares. That’s why I rate RDDT a **Buy**, despite the ongoing structural risks posed by Google Search. ## **There’s a Google in Reddit’s Way** Arguably, much of Reddit’s drastic loss of more than 60% of its market value in 2026 stems from a major structural problem: Google’s AI. For a long time, Reddit grew by attracting users searching for answers on Google Search. Now, with the rise of Google AI Overviews and AI Mode, many of these answers appear directly in search results, without users needing to visit Reddit. This trend threatens a key source of user discovery and acquisition, becoming a structural risk to Reddit’s business model. The company recently revealed three concerning developments during its Q3 earnings call. First, traffic from search engines fell significantly during Q3, with the decline accelerating throughout the quarter. Then, in October, search-referred traffic dropped by more than 1 million visits per week, on average. Finally, if these trends persist, daily active users (DAUq) could decline by a low double-digit percentage in Q4, from approximately 130 million. It’s worth emphasizing that this is a conditional scenario presented by management, not a confirmed forecast. ## **Less Traffic, More Money** The flip side is that, although Reddit has seen its traffic hit by Google’s AI, evidence already shows monetization is offsetting weaker audience numbers. While the total audience remained virtually flat between Q2 and Q3 at 130.3 million DAUq, the U.S. audience fell from 53.2 million to 50.7 million. Even so, U.S. revenue grew 50% year-over-year, reaching $719 million. Perhaps the most relevant data point came from COO Jen Wong during the earnings call. Logged-in users and app users account for more than 80% of Reddit’s monetization because they visit more often and are far more engaged than occasional visitors from search engines. ## **Why a Small Guidance Miss Matters So Much** Reddit’s Q4 guidance already gives investors some reason to worry. In most cases, uncertainty is more damaging than certainty, even when the news is bad. Before the company released its guidance for the final quarter of the year, Wall Street was expecting around $1.05 billion in revenue. Reddit’s guidance, however, came in at $1.015 billion at the midpoint, a difference of roughly 3.3%. Of course, it would be wrong to attribute that $35 million gap entirely to Google. Revenue guidance also depends on ad demand, ad prices, and other factors. That being said, this difference helps put the risk into perspective. This is especially true for a stock that traded at high-growth multiples until recently — 51.4x trailing earnings in March, 49.5x in June, and 33.1x in September — with investors expecting earnings estimates to be revised upward, and significantly so. That’s why even a relatively small shortfall in revenue expectations was enough to raise doubts about how sustainable Reddit’s top- and bottom-line growth really is. ## **After a 60% Sell-Off, Is Reddit Finally Cheap?** Following the 60% sell-off, Reddit isn’t conventionally “cheap” by every traditional metric, but its valuation has compressed enough to make it an increasingly strong long-term buy for patient investors willing to look past near-term AI search turbulence. Reddit investors are at a crossroads. On the one hand, Google may have permanently damaged a key source of user acquisition. On the other hand, Reddit continues to grow revenue by more than 50% and generate significant amounts of cash, including $934 million in free cash flow in the first nine months of 2026. Yet its stock has already lost more than 60% of its value this year. For me, the key issue here is valuation. After this year’s sharp correction, with Reddit trading near its 52-week lows, the stock trades at an enterprise value of just 3.3x estimated 2027 revenue. This assumes about 30% revenue growth next year. While more modest than the 53% expected for 2026, that’s still quite significant, especially for a company that has already posted an adjusted EBITDA margin of nearly 45%, up 4.6 percentage points year-over-year and 2.3 percentage points from Q2. Of course, the market may continue to revise estimates downward if the traffic decline persists. Yet I believe current prices already reflect much of this bearish scenario. After all, Reddit arguably no longer trades at the kind of multiples typically associated with high-growth stocks. ## **Is RDDT a Buy, According to Wall Street Analysts?** Reddit shares are still viewed favorably on Wall Street, with an overall consensus rating of Moderate Buy. Of the 23 analyst ratings issued over the past three months, 10 were Buy, 12 were Hold, and only one was Sell. Even though several analysts have sharply cut their price targets after Q3, the average Reddit price target stands at $160.80. At current prices, this implies a strong upside potential of 75.3%. ## **A Bargain, but Not a No-Brainer** I don’t think Reddit is a no-brainer just yet, even with its valuation now sitting well below what investors had become used to since the company went public just over two years ago. The changes to search because of Google pose a structural threat to Reddit’s growth story. However, there is still little evidence that this has translated into a structural threat to monetization. At least not yet. I think that’s an important distinction to make. Of course, weaker user growth could eventually hurt revenue and earnings. For now, Reddit continues to show it can make more money from its existing audience, even as traffic growth slows. That’s why I rate RDDT a **Buy** at current levels, seeing an opportunity to start accumulating shares gradually rather than going all in or waiting for the uncertainty to disappear entirely. ### Related Stocks - [RDDT.US](https://longbridge.com/en/quote/RDDT.US.md) - [RDDC.US](https://longbridge.com/en/quote/RDDC.US.md) - [RDTL.US](https://longbridge.com/en/quote/RDTL.US.md) - [RDYY.US](https://longbridge.com/en/quote/RDYY.US.md) - [GOOG.US](https://longbridge.com/en/quote/GOOG.US.md) - [GOOGL.US](https://longbridge.com/en/quote/GOOGL.US.md) ## Related News & Research - [Reddit is adding more ads](https://longbridge.com/en/news/304154126.md) - [BUZZ-Reddit set to break nine-session losing streak](https://longbridge.com/en/news/304140651.md) - [Will Reddit lose casual readers by forcing users to sign in?](https://longbridge.com/en/news/303700035.md) - [Reddit Director Mary Porter Gale Reports Sale of $588,000 in Common Shares](https://longbridge.com/en/news/304545763.md) - [Reddit blasts Australia's 'inept' social media ban as court challenge begins](https://longbridge.com/en/news/304051201.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**