Reddit's Stock Plunges as Google AI Overviews Drain Web Traffic

Reddit shares just took a massive hit, plummeting around 25% on October 30, 2026, marking what could be its worst day ever on the stock market. This sharp decline comes despite strong third-quarter earnings, as CEO Steve Huffman pointed fingers squarely at Google's AI-powered search features, specifically 'AI Overviews,' for significantly shrinking its web traffic. The move highlights a growing tension between platforms that host content and AI models that summarize it, potentially disrupting traditional web traffic flows and business models. The core issue is that Google's AI Overviews provide direct answers to user queries right on the search results page, reducing the need for users to click through to original sources like Reddit. Huffman revealed that search referral traffic was 'down meaningfully' in Q3 and dropped by over 1 million weekly referrals in October, a trend expected to continue into the fourth quarter. While Reddit reported robust Q3 2026 revenue of $895 million, up 53% year-over-year, its Q4 forecast of $1 billion to $1.03 billion fell short of analyst expectations, signaling market jitters about future growth prospects and user engagement, particularly a 2% dip in U.S. Daily Active Uniques. Looking ahead, Reddit is trying a defensive play: it will begin testing a 'logged-in-only' experience in certain international markets during Q4 2026. This move aims to gather more direct user data for ad targeting and encourage deeper engagement, but it's a risky bet that could alienate casual visitors and further impact traffic. The irony isn't lost on observers, as Reddit itself licenses its vast trove of human conversation data to AI companies like Google and OpenAI for training models, effectively contributing to the very technology now eating into its traffic.