Reddit Shareholder Sues Board, Execs Over Google AI’s Impact

Reddit Inc.‘s board and top executives misled investors about the negative impacts of Google Search’s algorithm and artificial intelligence updates on the social media platform’s traffic, a shareholder lawsuit filed Wednesday said.

The stock price suffered as analysts raised concerns about possibly permanent effects of Google upgrades leading potential users to stop their queries short before reaching Reddit, said a stockholder’s complaint filed in the US District Court for the Northern District of California.

Reddit management hurt the company’s reputation and wallet by having it misdirect investors about its user growth in the face of Google’s changes, the shareholder derivative action said, exposing it to potentially costly litigation and fixes to internal problems. Stockholder Jason King alleged wrongdoing from at least Oct. 29, 2024, through May 20, 2025.

Reddit’s share prices sank almost 9.3% to close at $95.85 May 21 after a Baird analyst lowered his price target on concerns about permanent traffic disruptions, King said. On May 19, Wells Fargo analysts downgraded Reddit shares over prolonged concerns about Google AI’s impact, he said.

The stock price fell 4.2% to close at $113.83 per share on May 2, the day after Reddit announced its first quarter 2025 financial results that showed its daily active unique visitors increased just 31% year-over-year, the complaint said. That figure marked Reddit’s third consecutive quarter of growth slowing, King said. This traffic is important because much of Reddit’s revenue derives from the sale of advertising slots on its platform, he said.

Still, Reddit CEO Steve Huffman told analysts on a call May 1 that he didn’t think there was a long-term risk when asked about user growth for the remainder of the year with recent Google algorithm changes, King said.

In February, Huffman said Reddit experienced some volatility in late 2024 from a periodic Google Search algorithm change, the complaint said. But he said that traffic had recovered in the beginning of 2025 and regained momentum, according to the complaint.

The derivative suit echoes allegations from a proposed class action filed in the same court last month against the company, Huffman, chief financial officer Drew Vollero, and chief operating officer Jen Wong.

King’s suit alleged securities law violations, breach of fiduciary duty, aiding and abetting of breaches, unjust enrichment, abuse of control, and waste of corporate assets by the board and those same executives.

Rigrodsky Law PA and Grabar Law Office represent King, who seeks corporate governance reform and damages for Reddit, among other relief.

Reddit didn’t immediately respond to an email seeking comment.

The case is King v. Huffman, N.D. Cal., No. 5:25-cv-05971, complaint filed 7/15/25.