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Reddit Misses Daily Visitor Estimates Due to Google Algorithm Change, Shares Drop

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Reddit (RDDT.N) fell short of market expectations for daily active unique visitors in the fourth quarter, impacted by a change in Google’s search algorithm that reduced its visibility in search results. This announcement sent Reddit’s shares tumbling 15% in after-hours trading on Wednesday.

The San Francisco-based company, which launched its IPO in March 2024, saw its stock surge nearly five-fold last year. However, volatility with Google search at the end of the fourth quarter affected traffic from “logged-out users”—those who browse without signing in, CEO Steve Huffman said in a letter to shareholders. Despite the setback, Huffman noted that traffic from Google search has since recovered in the first quarter of 2025.

Reddit’s daily active unique visitors grew by 39% to 101.7 million for the quarter ending December 31, but this fell short of analysts’ average estimate of 103.3 million, according to LSEG data. Growth has also slowed sequentially.

“Reddit shares are down due to missed expectations on daily active users, but it’s not a reason to lose faith in the company,” said Jeremy Goldman, senior director of briefings at eMarketer. He added that Reddit’s international expansion and AI advancements could help it become a digital advertising powerhouse.

Reddit has been leveraging AI deals with Alphabet’s Google and Microsoft-backed OpenAI, as well as conversation placement ads—where brands can advertise directly within subreddit discussions. These factors have helped Reddit forecast first-quarter revenue between $360 million and $370 million, surpassing analysts’ average estimate of $358.1 million.

The company reported fourth-quarter revenue of $427.7 million, beating the $405.3 million estimate, largely driven by holiday season ad spending. Profit per share came in at 36 cents, surpassing the 25-cent estimate. Reddit’s global average revenue per user increased by 23% to $4.21.

Additionally, Huffman mentioned ongoing discussions for data licensing deals with major industry players.

Google has yet to respond to inquiries about its algorithm changes.

Roblox Shares Tank After Weak Forecast, Fueling Fears of Slowdown in Gaming

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Shares of Roblox (RBLX.N) plunged by 17% on Thursday after the gaming platform issued a weak forecast for its 2025 bookings, sparking concerns about a slowdown in its growth following years of rapid expansion. The company anticipates bookings to fall between $5.20 billion and $5.30 billion for the year, with the midpoint falling short of analysts’ expectations, which were pegged at $5.27 billion.

The forecast adds to the growing unease within the video game industry, which has been facing sluggish growth. Electronic Arts (EA.O) also recently reported weak bookings, primarily due to its underperforming soccer franchise. However, Roblox’s projected growth still points to a third consecutive year of approximately 20% growth in bookings, even as the broader gaming market struggles with weak consumer spending due to inflation.

Roblox’s Chief Financial Officer, Michael Guthrie, defended the company’s performance, noting that Roblox continues to grow at a rate significantly higher than the overall gaming industry, which grew by just 2.1% in 2024 according to Newzoo. The platform has thrived by expanding into new game genres, especially those targeting older players, and by unlocking new revenue streams through ads and e-commerce. Additionally, Roblox’s free-to-play model and its user-generated content have helped the platform weather the broader gaming slowdown.

Despite the weak forecast, Wedbush Securities analyst Michael Pachter dismissed the market’s reaction, calling it “unwarranted” and “irrational.” He maintained an “outperform” rating on Roblox stock, with a price target of $83, the highest on the street.

Roblox’s daily active users fell to 85.3 million in the fourth quarter, down from 88.9 million in the previous quarter. Bookings for the quarter were $1.36 billion, slightly missing analysts’ estimates of $1.37 billion. Guthrie attributed the weaker results to tough year-over-year comparisons, notably following the PlayStation launch, which drove a surge in new users and spending in the same period last year. He also pointed to the platform’s suspension in Turkey, where Roblox was banned due to safety and child abuse concerns, as another factor impacting growth.

 

Snap Beats Profit Estimates on Advertising Platform Strength

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Snap Inc. (SNAP) exceeded Wall Street’s quarterly profit expectations on Tuesday, benefiting from significant improvements to its advertising platform. This growth helped boost its shares by 6% in after-hours trading. Amid growing uncertainty about a potential ban of TikTok in the U.S., analysts believe Snap could capitalize on the situation.

CEO Evan Spiegel stated that the uncertainty surrounding TikTok has been beneficial to Snap, as advertisers are focused on diversifying their ad spend and contingency planning. Snap is also considering increasing the price of its Snapchat+ subscription service to further raise its average revenue per user. The company reported a significant jump in Snapchat+ subscribers, which doubled to 14 million in the fourth quarter.

Snap has been heavily investing in artificial intelligence and machine learning tools to create more personalized ads. A notable shift in its strategy has been an emphasis on direct response ads, designed to prompt specific actions like app downloads or website visits, particularly as brand awareness ads show signs of weakness. These efforts have allowed Snap to tap into small- and mid-sized businesses, which have become the largest contributors to the company’s advertising revenue growth in 2024.

The company is also planning to expand its advertising formats, such as Sponsored Snaps (video ads in users’ inboxes) and Promoted Places (business location highlights on Snap Map), into additional markets.

“Snap’s diligent work on its ad platform and diversifying its revenue streams through subscriptions have paid off,” said Jasmine Enberg, principal analyst at eMarketer.

Snap reported adjusted earnings per share of 16 cents for the fourth quarter, surpassing analysts’ average estimate of 14 cents. The company also saw a 9% increase in daily active users, reaching 453 million, slightly surpassing the expected 450.8 million. For the first quarter of 2024, Snap forecasts revenue between $1.33 billion and $1.36 billion, with adjusted EBITDA expected to range between $40 million and $75 million, which is slightly below analyst expectations of $78.1 million.

Quarterly revenue rose 14% to $1.56 billion, marginally surpassing the average forecast of $1.55 billion.