Daniel Pronk on $RDDT (Nov 4, 2026)

Shopify. Next we'll talk about Intel and Reddit. This is a very interesting topic.

Okay, now let's head over to Reddit. Reddit shares fell 66 percent from their all-time high last year. It has fallen nearly 45 percent in the past month and is another stock that has completely collapsed after the release of its earnings report.

Looking at Reddit's earnings report, it can be seen that their daily active unique users increased by 12 percent to 130.3 million. Weekly active unique users increased by 16 percent to 515.2 million.

Revenue income has also increased by 53 percent compared to last year. Net income increased by 70 percent and operating cash flow nearly doubled, increasing by 96 percent compared to last year.

All things considered, this was actually a great milestone for Reddit.

They are now forecasting more than $1 billion in revenue and nearly $500 million in EBITDA for the fourth quarter. That's nearly 40% year-over-year revenue growth for the fourth quarter, a much larger slowdown than the pace they've been seeing over the past few years.

In this screenshot, you can see that Reddit has been growing consistently at a rate of around 60 to 70% since 2024. So 40% growth is now a major slowdown for business. Analysts fear that this slowdown will continue and that growth will drop to 30% by the end of 2027.

But this is not the main reason for the huge decline. Reddit reported that its US daily active users declined 2% year-over-year. However, their international daily active users grew by 24% and their overall daily active users grew by 12%.

But the United States is the main driver of business profits, and daily active users there have still declined. Daily active users logged in in the United States grew by just 1 %, but average revenue per user grew by 53% in the United States and 36% globally.

That means Reddit is making a lot of money per user, but their user base is not growing, especially in the United States.

In the conference call, management warned that their overall user base could decline in the fourth quarter. This is because search referrals from Google have decreased by an average of 1 million per week.

Management said that if this trend continues, daily active users could fall to a low double-digit percentage in the fourth quarter, which is a huge and steep decline. The reason for this is Google's new AI mode and summaries, which are preventing people from clicking on links on Google, which is where Reddit gets a large portion of its traffic.

On August 21st of this year, I had a debate with someone on Reddit about X and said that I don't like this business because it is too dependent on Google's decisions. Essentially, Reddit's growth and success are beyond their own control, and I think Google is now proving that.

This makes me uncomfortable about the business, and it's why I never wanted to buy shares in it.

However, it must be said that Reddit is now trading at 19 times its free cash flow and only 12 times its forward free cash flow estimate. And according to the fourth quarter forecast, this business is still growing at a rate of about 40% and is very profitable.

So, if Reddit can maintain this growth rate, or even grow by 20% from here, then this stock looks very cheap in my opinion. However, I am skeptical about the true sustainability of this business and its growth potential, especially if Google continues to move towards AI results and disrupts their process of acquiring new users.

Overall, I think Reddit looks cheap, but it's not a stock that I personally have enough confidence in to keep it in my portfolio or take a position in.