Reddit, Inc.

On May 1, 2025, after market hours, Reddit released its first quarter 2025 financial results, marking a third consecutive quarter with slowdown in daily active user growth. On this news, Reddit’s stock price fell $4.96, or 4.2%, to close at $113.83 per share on May 2, 2025, thereby injuring investors.

Then, on May 19, 2025, Wells Fargo analysts downgraded Reddit’s stock, stating that Google’s AI features would likely cause “permanent” disruptions to user traffic for Reddit, and that traffic to Reddit from Google Search would continue to decline and ultimately hurt Reddit’s advertising revenue. On this news, Reddit’s stock price fell $5.24, or 4.6%, to close at $107.99 per share on May 19, 2025.

Then, on May 21, 2025, Baird analysts downgraded Reddit’s stock, citing similar concerns as Wells Fargo. On this news, Reddit’s stock price fell $9.79, or 9.3%, to close at $95.85 per share on May 21, 2025, thereby injuring investors further.

The complaint filed in this class action alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) changes in Google Search’s algorithm and features like AI Overview were causing users to stop their query on Google Search; (2) these algorithm changes were materially different than prior instances of reduced traffic to the Reddit website; (3) Defendants were aware that the increase in the query term “Reddit” on search engines was because users were getting the sought after answer from Google Search without having to go to Reddit, and not because they intended to visit Reddit; (4) this zero-click search reality was dramatically reducing traffic to Reddit in a manner the Company was unable to overcome in the short term; (5) Defendants, therefore, lacked a reasonable basis for their outlook on user rates and advertising revenues; and (6) as a result, Defendants’ positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis at all relevant times.