It looks like Snap has snapped. And not in the way the cool kids use the term. Snap (SNAP, $16,35) reported its Q2 earnings after the closing bell on Thursday, missing Wall Street's expectations and sending shares plunging 23% in after-hours trading. To compound matters, it said it plans to slow hiring as it reckons with weakening revenue growth.
The company made $1.11 billion in revenue during Q2, up from $982 million in 2021 despite this it missed Wall Street expectations of $1.14 billion. Its earnings per share saw it take a loss of 2 cents, adjusted, versus an expected loss of 1 cent, according to a Refinitiv survey of analysts
The platform added 15 million more users, bringing it to 347 million. However the average revenue per Snap user fell 4.5% year-over-year, and the company said it wasn't providing Q3 guidance given the current financial climate. In a move to steady investor nerves, the company said it had signed Snap co-founders Evan Spiegel and Bobby Murphy, the company’s CEO and CTO, to stick around for another four years, through the end of 2026.
“We are not satisfied with the results we are delivering, regardless of the current headwinds,” stated the company in its investor letter. "We are evolving our business and strategy to reaccelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our topline growth," added CEO Evan Spiegel.
Why it matters
The problem for Snap is that it’s simultaneously dealing with a shaky economic environment and the fallout of an advertising market that was upended by Apple last year when the company dramatically limited the type of user tracking that advertisers had long relied on. “Platform policy changes have upended more than a decade of advertising industry standards,” Snap wrote. Overall tech stocks have been eviscerated this year, with shares of Amazon down more than 25% and shares of Facebook parent Meta off 45% year-to-date. However, it is a bad look for Snap whose shares are off a brutal 65% year-to-date, putting it in the rare company of the likes of Netflix, which is down 63%