What happened: Reddit (RDDT) stock plunged more than 22% on Friday, its largest intraday decline since the company went public.
What’s behind the move: The user discussion platform company’s latest earnings report did not announce any new artificial intelligence data licensing agreements, disappointing investors who were expecting more revenue opportunities from AI partnerships.
Revenue of $804.9 million beat estimates of $731.8 million. However, US daily active users came in at 53.2 million, just shy of expectations of 54 million. The company’s total daily active users grew by 18% to 130.3 million versus estimates of 130.07 million.
What else you need to know: Reddit’s main revenue comes from its advertising business, but Wall Street has increasingly focused on the potential of Reddit’s data licensing deals, given the platform’s massive collection of user-generated discussions, which have become valuable for AI companies training models.
The company has already signed major agreements with OpenAI (OPAI.PVT) and Google (GOOG, GOOGL).
When asked about new deals by an analyst, CEO Steve Huffman said, “These deals aren’t binary. They have to make sense for Reddit, but there are many ways, I think, for the value to return to Reddit.”
At the same time, Huffman noted “headwinds” in search referrals as AI changes how users discover online content.
“Search referrals were choppy in the quarter, and traffic was more volatile later in the quarter,” he said, later adding: “Our visibility on search continues to remain low, and we expect it to probably continue to be volatile.”
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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