Why Reddit Stock Dropped?
Reddit stock (NYSE:RDDT) lost about 10% over the last week, as compared to the roughly flat performance of the S&P 500 Index. Reddit’s stock price movement stands out against its peers, including Meta Platforms – down about 3% for the week, Snap – up around 8%, and Pinterest – down roughly 3%.
The decline reflects investor concerns about slower user growth and potential traffic headwinds tied to changes in Google’s search algorithms and AI-generated answers, which could reduce engagement and advertising potential on the platform. At the current price of around $237 per share, we believe Reddit may face near-term pressure before stabilizing. Notably, the stock is still up significantly from its IPO levels in early 2024, and has jumped 45% since late 2024 as well, as detailed in our analysis of Why Reddit Stock Moved.
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Factors that drove changes in Reddit’s stock over recent years
Some of the rise in Reddit’s stock since IPO is justified by the roughly 30% growth seen in its revenues from 2022 to 2024. Revenue growth jumped in 2023 with the rollout of new ad products and licensing deals, and momentum carried into 2024 with continued expansion in advertising and AI-related data licensing. However, growth began to moderate somewhat in early 2025 amid concerns over traffic sources and user engagement trends.
While Reddit has seen steady revenue growth, its PS multiple has not expanded meaningfully. The company’s PS multiple changed from about 10x in 2024 to nearly 12x in mid-2025. While the company’s PS is now above historical levels, there could be downside when the current multiple is compared to prior peaks – about 15x in late 2024 and closer to 9x as recently as early 2023.
What to expect from Reddit’s stock
In its most recent quarter, Reddit reported revenue of roughly $240 million, up more than 20% year-over-year, and posted its second quarterly profit since the IPO. However, daily active users of 100 million came in slightly below bullish expectations, which spurred worries about saturation and competition.
For full-year 2025, Reddit guided to mid-20% revenue growth, but commentary around traffic uncertainty has left investors cautious. If the company can show resilience in engagement and continue to scale its ad products, the stock could regain momentum. But near-term, volatility is likely to persist as investors weigh high valuation multiples against execution risks.
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