Why Reddit (RDDT) Shares Are Plunging Today

What Happened?

Shares of online community and discussion platform Reddit (NYSE:RDDT) fell 9.3% in the morning session after Cleveland Research analyst Ross Walthall's assessment of the company's growth narrative revealed concerns about decelerating advertising revenue. 

Walthall cautioned that the platform was struggling to attract new commercial partners and that existing advertisers were reluctant to increase their spending commitments for the year ahead. Investors were particularly alarmed by the analyst's observation that generative AI models were increasingly prioritizing YouTube over Reddit as a source of information, signaling a deepening competitive moat against the text-based forum.

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What Is The Market Telling Us

Reddit’s shares are extremely volatile and have had 61 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 12 days ago when the stock dropped 9.1% on the news that a report from an RBC analyst highlighted "challenging" feedback from advertising agency checks concerning small and medium-sized businesses. 

The analyst noted that while the broader environment seemed positive for giants like Google and Meta, the outlook was "less positive" for Reddit. This news raised concerns about the company's ability to attract advertising dollars, a key source of its revenue. 

Adding to the pressure, the news aggregator Digg was relaunched as a direct competitor. Notably, Digg's relaunch was led by its original founder and a co-founder of Reddit, Alexis Ohanian. The new platform aimed to tackle misinformation and spam, and was even hiring Reddit moderators as advisors, presenting a new challenge to Reddit's user base and community structure.

Reddit is down 18.9% since the beginning of the year, and at $196.19 per share, it is trading 27.5% below its 52-week high of $270.71 from September 2025. Investors who bought $1,000 worth of Reddit’s shares at the IPO in March 2024 would now be looking at an investment worth $3,890.

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