Reddit Shares Slide as Analysts Warn of Slower Growth in 2026

2026-01-27 companies

San Francisco, Tuesday, 27 January 2026.
Shares fell 9% today after reports highlighted that only 59% of advertisers are beating ROI targets—down from 76%—signaling potential revenue headwinds from large U.S. agencies.

Analyst Downgrades Spark Revenue Concerns

The catalyst for Tuesday’s market movement was a report from Cleveland Research analyst Ross Walthall, which cast doubt on the social media platform’s ability to maintain its growth trajectory through the next fiscal year [1][4]. Walthall’s analysis points to a distinct split in advertiser confidence: while European and smaller U.S. partners are maintaining steady outlooks, large U.S. agencies are reducing their spending forecasts [1][4]. This divergence has led Cleveland Research to project 2026 revenue growth at 36% year-over-year, totaling $2.9 billion—a figure that notably trails the broader consensus estimate of 39.1% or $3.0 billion [1][4].

Advertiser Sentiment and Competitive Pressures

Beyond the headline revenue figures, the report exposes underlying friction in Reddit’s advertising efficiency. In a concerning trend for the platform’s direct-response business, the percentage of partners meeting their return on investment (ROI) targets has dropped significantly to 59%, a steep decline from the 76% reported in the previous quarter [1][4]. Analysts suggest that accelerating the adoption of Reddit’s Conversion API (CAPI) is now critical to unlocking further ad spend and reversing this sentiment [1][4]. Furthermore, the competitive landscape is intensifying; advertisers are expected to shift 2026 budget allocations aggressively toward TikTok and Snap, while emerging test budgets for ChatGPT present a new threat to Reddit’s market share [1][4].

Market Reaction and Near-Term Outlook

The market’s reaction was immediate, with shares trading down to $195.09 by Tuesday morning, representing a drop of roughly 8.68% from the previous close of $213.63 [5]. This pullback places the stock well below its 52-week high of $282.95, set in September 2025 [5]. Despite the negative long-term forecast, Cleveland Research remains constructive on Reddit’s immediate performance, modeling fourth-quarter revenue growth of 56.4% year-over-year, which slightly edges out the consensus expectation of 55.7% [1]. Investors will be looking for confirmation of these short-term trends when the company reports earnings on February 5, 2026 [5].

Sources

Reddit equity markets