TLDR
- Reddit stock fell 11.9% to $202.60 on October 1 amid weak user engagement data.
- SimilarWeb reported declining DAUs on a 30-day average.
- Promptwatch data showed Reddit’s ChatGPT citation share plunging from 29.2% to 5.3%.
- RBC Capital remains cautious but expects strong ad momentum.
- Reddit’s Q3 earnings are projected at $0.50 per share on $549.69 million revenue.
Reddit Inc. (NYSE: RDDT) shares slid 11.91% to $202.60 at the close on October 1, 2025. The decline came after third-party data highlighted falling daily active users (DAUs) and a significant reduction in citation share on OpenAI’s ChatGPT. Pre-market trading on October 2 saw a modest recovery, with shares up 2.4% to $207.45.
The drop underscores investor sensitivity to engagement trends, which are key drivers for Reddit’s ad-based revenue model.
$RDDT DOWN 12% AFTER DATA SHOWS CHATGPT’S USE OF REDDIT SOURCES PLUNGED
From ~15% in early September to near 5% by month-end. That’s a direct hit to Reddit’s pitch as a must-have AI data supplier & dents the one high-margin revenue stream backing its premium valuation. pic.twitter.com/HphxJR2dKL
— Shay Boloor (@StockSavvyShay) October 1, 2025
Concerns from SimilarWeb and Promptwatch
Data from SimilarWeb revealed DAUs on a 30-day trailing average were falling, sparking concern about user retention. Promptwatch, tracking AI outputs, reported Reddit’s citation share on ChatGPT dropped from around 29.2% to 5.3% since September 10.
Analysts suggested the change partly stemmed from Google’s decision to reduce indexing parameters from 100 to 10 per page, limiting the data accessible to large language models.
Analyst outlook remains cautious
RBC Capital analyst Brad Erickson maintained a Sector Perform rating with a $245 price target. Erickson acknowledged the uncertainty around Reddit’s actual traffic derived from ChatGPT but pointed to likely strong advertising momentum.
Still, limited visibility into long-term engagement and generative search implications leaves some caution for investors.
Earnings expectations
Reddit is scheduled to release earnings in the coming weeks. Analysts forecast Q3 earnings of $0.50 per share, representing 212.5% growth year-over-year. Revenue is expected to reach $549.69 million, up 57.8% from last year.
Full-year estimates call for $1.82 per share in earnings and $2.05 billion in revenue. While these figures indicate rapid growth, investors are balancing these expectations against the risk of slowing engagement metrics.
Valuation and industry context
Reddit currently trades at a Forward P/E ratio of 126.42, significantly higher than the Internet–Software industry average of 30.19. Its PEG ratio stands at 3.62, compared to the industry’s 2.3, signaling that the stock is priced at a premium relative to its growth outlook.
The Internet–Software group ranks in the top 24% of industries tracked by Zacks, suggesting favorable conditions, though engagement data could remain a drag.
Performance overview
Despite recent weakness, Reddit has delivered outsized long-term returns. The stock is up 23.96% year-to-date and has surged 207.11% over the past year, far outpacing the S&P 500’s 17.56% gain. Over a three-year horizon, Reddit is up 331.06%.
Investors will be watching the upcoming earnings report closely to gauge whether Reddit can maintain its growth trajectory while addressing concerns over user activity and AI-driven traffic shifts.
