Snap announced plans to “significantly reduce” hiring and shake up its strategy as it posted dismal second-quarter results, blaming tough macroeconomic conditions but also saying it was “not happy with the results. . . regardless of current headwinds”.
The social media company lost about a quarter of its value on Thursday after publishing results that CEO Evan Spiegel said “do not reflect our ambition.”
Revenue at the Los Angeles-based social media company rose 13 percent to $1.11 billion in the three months to the end of June, slightly short of analysts’ consensus of $1.13 billion.
Net losses rose 178 percent from the same period last year to $422 million, far exceeding analysts’ estimates of a loss of $340 million, according to data compiled by S&P Capital IQ.
The company issued a surprise warning in May that the rate of revenue growth would fall below its original guidance of between 20% and 25%, citing a rapidly deteriorating macroeconomic environment.
Spiegel said Snap plans to focus on product innovation, revenue diversification and investment in its direct-response advertising business to deal with the slowdown.
In a letter to investors on Thursday, Snap said brands are cutting digital advertising budgets because of the broader economic slowdown and inflationary pressures, as well as privacy changes from Apple that make it harder to target ads and measure the success of campaigns.
He also said business has been hurt by increased competition as new entrants such as China-owned TikTok take market share.
Daily active users grew 18 percent to 347 million in the quarter, it said.
Snap declined to provide third-quarter revenue or earnings expectations, citing “uncertainties related to the operating environment.”
Social media platforms — like other tech stocks — have exploded in growth over the past two years as entertainment-hungry consumers have spent more time and money online during the coronavirus pandemic lockdown.
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But that has turned into a deep and broad sell-off in shares in recent months, forcing major tech groups such as Meta and Google to halt hiring and announce other cost-cutting measures.
Snap shares fell about 25 percent to $12.33 after the news of the results. Other tech stocks with ad-based business models were also hit: Facebook parent Meta fell 5% in after-hours trading, while Alphabet, owner of Google, fell 3%.
Snap said it intends to drive greater productivity by reducing its hiring rate and by “rigorously reprioritizing goals and initiatives across the company.”
Separately, it said it authorized a share buyback program of up to $500 million of its Class A common stock. Snap also said that Spiegel and co-founder and chief technology officer Bobby Murphy have entered into long-term employment contracts with the company. They will serve in their respective positions until at least January 1, 2027, at an annual salary of $1.
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