Schwab Network on $RDDT (Oct 30, 2026)

It's a deep selloff here today uh off the back of its quarterly results. Yeah, Reddit got absolutely clobbered after its earnings event and a lot of this is tied to a pretty steep slowdown in that search referral traffic and also just a slowdown in its revenue growth even versus last quarter.

And we've seen a bit of a Reddit decline whenever we look at overall platform engagement. We have those tracking about 5% lower on a year-over-year basis versus last year. And this is a flip from last quarter when we had that up by about 5% year-over-year.

So, this slide is continuing to steepen a bit, which is exactly what Reddit reported this morning.

And then also perhaps a bit more concerning for the company is we have our ad visits tracking about 5% lower now year-over-year versus they were about 28% higher last quarter, so in Q2.

So for us, we're seeing a decline in the actual platform engagement, but also a decline in that ad interest. And I think that's really critical for the company.

So, whenever you're Reddit and you see you're you're losing more ground versus these larger competitors, um that's a little bit alarming.

And I think that Reddit is working to create a better experience. They're working to create more logged on users. That's really, you know, in past reports, we've kind of cut through logged on versus logged off users and how the company can monetize that.

And we know that those logged on users are much more valuable to Reddit. They drive about 80% of its monetization. And so if Reddit can get more users logged on and and ultimately likely improve ad targeting because of that um we think that that's a step in the right direction.

But certainly when it comes to investors who are saying is you know is this decline in search referral traffic is this decline in engagement going to continue even after this quarter?

So far our data looks like it will continue to slide just a bit.

yeah, that surf search referral traffic here, Megan, uh from Google uh below expectations. But then, you know, they're also going to make you uh start to sign in, right? Um they're trying to get away from maybe uh the scraping that's done from some of these AI bots at this point, but is that going to negatively impact it?

I mean, do you guys see that as far as your data goes where that's actually going to be not good for them uh at all if these bots and uh can't go into Reddit and maybe you know that was one of the easy parts of using Reddit that you didn't have to log in, you didn't have to do anything, you could see some of the uh you know the the commentary from questions a asked.

Is that going to hurt their uh their growth moving forward?

I think that there could be a near-term hurdle. You know, we do see some consumers who say, "Oh, you know, there, you know, consumers get used to a platform behaving a certain way."

And so when now there is a barrier to entry, you might get a little bit of resistance. But we do think that long-term, this does play much better for Reddit because in the same way, um, you know, whenever you're whenever you talk about the data licensing and potential scraping, you kind of eliminate that. we're starting to see some some signs that Reddit is doing a better job there so they can monetize perhaps this other segment of revenue that they have.

So if they can kind of close off their ecosystem a bit to where as a user you have to actually click through, you have have to actually go on Reddit, they become a bit more sticky because that's the big thing right now whenever you think about Reddit.

This isn't something where users are going every day. They they really need to work on creating that habitual users if they want to play especially in the advertising realm with much bigger players um like a Snapchat or even like a meta which have that kind of peer component that right now Reddit is lacking.

So I think that long-term, at least in our data, we think that this is probably the smartest move just to kind of retain that engagement and retain that better targeting even when it comes on a user basis when it comes to advertising.

However, would not be surprised to see some push back in the near term. So this is one where even though the stock has pulled back so much, we would be really cautious getting into because we expect perhaps a little bit of resistance on the consumer front as that change occurs,

The stock was already down sharply coming into today. Um, so there was obviously concerns hanging over this. Uh have you all noticed an ongoing shift in terms of patterns of what user or what sentiment is like where there's been a deceleration not just recently with regard to Reddit?

Yeah, this is something that we've watched really for a couple of quarters now just a slowdown and a shift in engagement and this is likely due to a lot of those referrals the the headwinds that Reddit itself cited.

But I think the biggest the most alarming thing for us is we see this steepening even in the last month.

Um so whenever you think about guidance, you know, Reddit kind of guided that that daily active uniques this growth would um fall a couple of points even into next quarter and we certainly expect this and we think it may even be more steep than even Reddit anticipates.

So we don't necessarily think that the bleeding in this stock is done yet but um for us whenever we look at our score our score comes out we're technically still neutral because we have seen such a big pullback and we do still see Reddit growing. its revenue on a year-over-year basis, albeit slower.

But, um, there are certainly mechanisms that it's exploring to try to improve. So, we'll have to watch it in the coming quarter to see how things shake out.

But, the biggest red flag for us is just that slide than user engagement and most importantly and advertising interest because advertisers obviously don't like to see the the engagement levels dropping.

So, if if Reddit can figure out how to keep more users engaged, if they can get this logged in um experience better, then this would be one that we would look at, especially as the stock pulls back.

But we we expect a little bit of near-term pain in the meantime.

Daily Active Uniques, you know, grew 12% a lot of international growth because it was down 2% in the US. Is this because that's the way that I think about it with Reddit. It's just maybe one of those niche products like maybe like Snapchat for the the younger generation where the growth just isn't going to be there because it is a niche product.

Yeah. And you know, whenever Reddit talks about what it's doing to drive a value proposition, it talks about really working on those different Reddit segments, those topics, those subtopics that users can become experts in that if you're looking for a new pair of shoes or you're looking for a baby item, you're looking for a book, this is a place that you can go and you can understand how your peers are shopping and where they're shopping and what they recommend.

And that is a unique value proposition that Reddit has that it can then kind of pitch to advertisers and especially if Reddit can show advertisers conversions from its platform.

I think that that's really its biggest selling point moving forward.