Shares of Reddit (NYSE: RDDT) fell 9% on Tuesday after Cleveland Research published a note that painted a more restrained picture of the company’s growth trajectory into 2026. The analyst, Ross Walthall, cited a combination of softer demand from new advertisers and waning confidence that existing clients will meaningfully increase their spending.
Walthall’s research found that larger U.S. advertising partners are more likely to pare back their forecasts for spending growth, while European agencies and smaller U.S. partners are maintaining steadier outlooks. The note emphasized a moderation in expected momentum as the company moves into 2026.
Walthall wrote: "Our research was less optimistic on the pace of growth into 2026 - we saw reduced forecasts from large US agencies, somewhat offset by steady outlooks for European & smaller US partners."
The report also pointed to a decline in advertiser-level performance metrics that could influence budget decisions. While 59% of partners reported beating return-on-investment targets, that share fell from 76% in the prior quarter. The Cleveland Research team indicated broader adoption of Conversion API, or CAPI, may be required to unlock additional direct-response advertising dollars.
On modeled revenue, Cleveland Research now expects Reddit’s 2026 revenue to increase 36% year-over-year to $2.9 billion, below the consensus projection of 39.1% growth to $3.0 billion. For the nearer term, the firm remains modestly more bullish on the current quarter, projecting fourth-quarter revenue growth of 56.4% year-over-year versus consensus expectations of 55.7%.
Competitive dynamics were flagged as an additional risk to Reddit’s ability to capture advertiser budgets. Advertisers surveyed by the firm expect TikTok and Snap to press more aggressively for budget share in 2026, and Cleveland Research also noted potential share shifts from budgets allocated to ChatGPT test programs.
The combination of slowing advertiser momentum among major U.S. partners, a drop in partners meeting ROI targets, and heightened competition formed the basis for the more cautious 2026 revenue outlook and the market reaction that followed.