Evercore ISI downgrades Reddit on monetization concerns amid traffic weakness

Evercore ISI downgraded Reddit to In Line from Outperform and cut its price target to $120 from $265 on Friday, citing concerns that monetization gains may not offset traffic weakness. The downgrade follows Reddit's third-quarter results that beat estimates but included warnings of declining traffic pressured by AI search summaries. U.S. daily active users fell 2% year over year, and management warned global daily active users could drop by a low-double-digit percentage in the fourth quarter if search-referral losses continue. Evercore noted structural headwinds from Google's AI-driven search changes and lower rankings for machine-translated content. Reddit shares fell over 29% Friday after reporting adjusted earnings of $1.40 per share, beating the consensus estimate of $1.33, with revenue rising 53% to $895 million. The company's fourth-quarter revenue forecast midpoint of $1.015 billion fell below Wall Street's $1.05 billion estimate. CEO Steve Huffman said search referral traffic declined meaningfully in the third quarter, with October search traffic falling by more than 1 million referrals per week on average.