Reddit's fourth-quarter forecast and user count came in below estimates, and its chief executive pointed to falling traffic from Google's AI-generated search results. Roblox, Twilio and Pinterest fell 9% to 20% in extended trading.
For four consumer-internet and software companies on Thursday night, the third quarter mattered less than what they said about the fourth.
Reddit: strong quarter, softer outlook
Reddit's third-quarter revenue rose 53% to $895 million, and advertising revenue 54% to $847 million. Earnings were $1.40 a share, above the $1.35 analysts expected, and free cash flow was $363 million.
The forward picture was weaker. Reddit expects fourth-quarter revenue of $1.00 billion to $1.03 billion, below the roughly $1.05 billion expected. Daily active uniques were 130.3 million, against an estimate of 137 million, and in the United States they fell 2% from a year earlier.
Chief Executive Huffman attributed the slowdown in users to reduced referral traffic from Google, as generative-AI answers in search send fewer people to the site. Reddit will also test logins outside the United States in the fourth quarter, CNBC reported.
Reddit shares fell 23.1% to about $99.78 in extended trading, from a $129.70 close.
The explanation matters for the whole sector. If a meaningful share of Reddit's audience growth came from search referrals, and AI answers are reducing them, the issue is not specific to one quarter.
Roblox, Twilio, Pinterest
Roblox reported a loss of 32 cents a share, narrower than the 43-cent loss analysts expected, and gave cautious guidance. Its shares fell 19.7% to about $42.13 from $52.46.
Twilio's quarter was strong by most measures. Revenue was $1.56 billion, organic growth 16%, and adjusted earnings $1.65 a share against an estimate of $1.47. It raised its full-year outlook across major metrics, but forecast slower organic growth in the fourth quarter. Its shares fell 17.3% to about $200.02 from $241.90.
Pinterest missed on the quarter as well as the outlook. Earnings of 46 cents a share were below the 49 cents expected, revenue of $1.17 billion was short of $1.21 billion, and its fourth-quarter profitability forecast was below estimates. Its shares fell 9.0% to about $18.11.
What links them
Three of the four beat or met third-quarter expectations and fell anyway. The common thread was the forecast: Reddit's revenue range, Roblox's caution and Twilio's slower organic growth. Only Pinterest missed on the quarter itself. Investors appear to be paying for acceleration and selling any sign of a slowdown, on a night when Amazon and Intel were also falling.
Overreaction or warning?
The overreaction view: Reddit still grew more than 50%, Twilio raised its full-year outlook, and declines of a fifth or more for companies that beat the quarter may exceed what changed.
The warning view: Reddit's user count missed and U.S. users shrank, the chief executive named a structural cause, and growth stocks priced for acceleration are being repriced quickly when it fades.
What to watch
Friday's regular-session trading, Reddit's login test and U.S. user trend, Roblox's bookings detail, Twilio's fourth-quarter organic growth, and Pinterest's ad pricing.