Reddit Inc. intends to restrict access to its online discussion boards in an effort to push users to create accounts and boost engagement, sparking investor worries that the change will instead hurt traffic while the company is already facing a decline in active US users.

Reddit shares dropped 18% in after-hours trading.

The company's revenue guidance of $1 billion to $1.03 billion also came in below analysts' projections, as did total daily active users in the US, which dropped 2% from a year earlier, according to a statement released Thursday.

While the company reported third-quarter sales that surpassed analyst expectations, Chief Executive Officer Steve Huffman revealed that Reddit will eventually limit how much of the platform people can browse without an account. The company intends to begin testing various approaches in markets outside the US throughout the fourth quarter, and has not yet determined which sections of its site will remain accessible to logged-out visitors.

This strategy represents a major shift for the company, which has permitted users to explore its forums without an account for two decades. Reddit executives are prepared to sacrifice some of the platform's reach to engage a smaller but more dedicated audience with insights that will be valuable to advertisers.

"Every other platform has done this," Huffman said on a call with analysts on Thursday. "There's a lot of opportunity here," he said, adding that he believes that's why peer companies have made similar moves.

Wall Street wasn't persuaded. Shares of Reddit, which recently joined the S&P 500, fell about 18% in afterhours trading in New York. They were down 44% for the year through the market close on Thursday. Even as the ads business grows, investors are intensely focused on how Reddit will attract and retain users in the age of artificial intelligence.

"Reddit's pivot toward a more logged-in experience stands to become a headwind to daily active user growth, currently in the low-double-digit percentage range," Bloomberg Intelligence analysts Mandeep Singh and William Tong said in a note.

In an interview, Chief Operating Officer Jen Wong acknowledged the potential for the move to limit Reddit's reach in the short term but said it would eventually lead to more growth. "I think that's a trade that makes sense for the long term."

Huffman said more than 80% of Reddit's revenue comes from logged-in users.

Since going public in early 2024, the San Francisco-based company has grown its digital advertising business rapidly. Reddit reported third-quarter sales of $895 million, beating the average analyst estimate compiled by Bloomberg, largely driven by the continued growth of its advertising business.

Worldwide daily active users increased 12% year-over-year to 130.3 million, below the average analyst estimate of 133.5 million.

To date, many users have found Reddit through Alphabet Inc.'s Google, making the company vulnerable to algorithmic changes and, now, AI-generated responses. Investors have anxiously awaited details to emerge out of the platform's content-licensing talks with Google and other AI model providers as Reddit seeks to monetize its unique data and protect it from unauthorized scraping.

The strategy shift could help give Reddit more control of its user base by encouraging people to visit the platform directly rather than through search engines or AI models. But it could also threaten growth. In the third quarter, Reddit reported that the number of logged-out users globally grew 17% year-over-year, while logged-in users worldwide increased by just 7%.

Wong said that users with accounts have roughly 10 times the engagement of those who do not log in.

She also cautioned against viewing the strategy as a response to Reddit's ongoing negotiations with AI companies. Those talks, she said, remain "complicated."

"There's a wide range of outcomes, including, if it's strategic, to not renew a partnership," she said.