Reddit Disappoints Wall Street With Unique User Count Below Expectations

Reddit’s first public year ended with strong gains across key financial metrics, but Wall Street’s reaction was lukewarm. The company posted net income of $71 million in Q4 2024, up significantly from $18.5 million a year earlier, while EPS ($0.36) beat analysts’ estimates. However, a lackluster increase in daily active users (DAU) — 101.7 million instead of the expected 103.3 million — sent shares down 15% in after-hours trading. Despite a partial recovery, the company’s shares are still down 8.7% from their pre-earnings levels.

Image source: Reddit

Reddit has released its quarterly and annual earnings report, highlighting significant revenue and profit growth in Q4. Net income was $71 million, more than 3.8 times higher than last year’s $18.5 million. Earnings per share reached $0.36, which was higher than analysts expected. The company’s revenue increased to $428 million, strengthening its positive financial trends. However, the key metric that disappointed the market was the data on global active unique users (DAU), which increased by 39% year over year, reaching 101.7 million, but fell short of the forecast of 103.3 million.

Reddit shares plunged 15% in over-the-counter trading, one of the steepest short-term declines in recent memory. While the stock partially recovered the following day, the overall decline from its previous levels is still 8.7%. The move highlights investors’ sensitivity to audience growth metrics, despite the company’s strong financial results. Reddit CEO Steve Huffman sought to assuage investor concerns by attributing the decline in DAU growth to temporary traffic fluctuations caused by Google Search’s algorithm update. He said search traffic, which primarily affects unregistered users, rebounded in Q1 2025 and the platform is once again gaining audience.

«”We did see some changes in Google’s algorithm that caused short-term fluctuations in traffic volumes, but that has stabilized,” Huffman said. He also noted that such fluctuations are periodic, are not unique to Reddit, and mostly affect users who engage with the platform’s content without registering. Investors and analysts have asked for more clarification on Google’s algorithm changes, but Huffman did not elaborate, saying only that he has “some guesses” about why the traffic fluctuations occurred. He emphasized that the company has faced similar situations before, successfully adapting to changes in search engine algorithms.

With search traffic in fluctuations, Reddit has focused on increasing the share of registered users. Huffman said that about 80% of new users previously abandoned registration at the name selection stage, but in 2024, the process was simplified: users can now log in to the platform via email, phone number, and Google or Apple accounts. This has significantly increased the conversion of unregistered visitors to authorized users.

Despite the strong quarterly numbers, Reddit’s full-year results were less impressive. The company posted a net loss of $484.3 million for 2024, up significantly from the $90.8 million loss in 2023. However, Reddit CFO Andrew Vollero explained that the bulk of the loss — $595 million — was due to a one-time accounting adjustment related to the company’s stock compensation program following its initial public offering (IPO). About $575 million of the total loss was in Q1 2024, Vollero said, which explains the sharp increase in net losses. The company has posted positive financial results in the past three quarters, indicating the stability of its operating model.

«“These expenses are impossible to account for while the company remains private, but after going public, we had to recognize these compensation payments in the financial statements,” Vollero explained. He emphasized that excluding these one-time expenses, Reddit has been profitable in the last three quarters. The outlook for 2025 remains cautious. Vollero noted that the company cannot yet provide long-term forecasts, since its current business model involves a significant volume of transactions concluded within each quarter. For the next quarter, Reddit forecasts revenue in the range of $360–$370 million, and adjusted EBITDA at the level of $80–$90 million. This is significantly lower than the figures for Q4 2024, when the company recorded revenue of $427.7 million and EBITDA of $154 million. A decrease in these indicators could become an additional factor of concern for investors, especially given the insufficient dynamics of DAU growth.

While Reddit has shown solid revenue and profit growth overall, investors are concerned about the pace of user growth and the uncertainty of future financial outlook. Fluctuations in search traffic, which impacts user acquisition, remain a significant challenge for the company. In 2025, Reddit’s key challenges will not only be continued revenue growth, but also user retention and expansion, which will be critical to the company’s long-term attractiveness on the stock market.