Oct 30 (Reuters) - Shares of Reddit tumbled 23% in premarket trading on Friday after it warned Google's growing use of AI in search was hurting referral traffic and could shrink its user base, offering fresh evidence of AI-driven disruption.
Pinterest also fell 7.28% after forecasting fourth-quarter revenue below Wall Street estimates, as a pullback by cross-border sellers in Europe weighed on its outlook.
Here are more details:
• Reddit's warning highlights how Google's shift toward AI-powered search, which can answer queries directly, is disrupting the flow of traffic to websites that have traditionally relied on the search engine for users
• Total daily active unique visitors could fall by a low double-digit percentage in the fourth quarter from about 130 million if referral traffic continues to fall, Reddit said
• JPMorgan analysts said the expansion of Google's AI Overviews and AI Mode, along with changes to how machine-translated content is ranked, has pushed search traffic down
• A reset in expectations is appropriate and the near-term outlook is increasingly clouded, said Piper Sandler analysts
• Meanwhile, Reddit said in a filing it had extended its cloud services agreements with Amazon Web Services and Google through 2029, committing to spend $880 million and $580 million, respectively, over three years
• Pinterest's third-quarter revenue of $1.17 billion missed analysts' estimates of $1.21 billion, according to data compiled by LSEG
• Pinterest forecast fourth-quarter revenue of $1.425 billion to $1.475 billion, below Wall Street estimates
• RBC analysts said changes to the EU's de minimis exemption hit cross-border sellers sooner and harder than expected, leaving Pinterest's European revenue flat
• Reddit had fallen about 44% this year and Pinterest about 23% through Thursday's close
• If current losses hold, Reddit is set to lose $5.7 billion in market value and Pinterest more than $800 million
(Reporting by Anzar Mehraj in Bengaluru; Editing by Leroy Leo and Jonathan Ananda)
