Snap’s revenue growth slowed and losses widened in the third quarter as the company embarks on a radical restructuring to confront challenges around targeted advertising and the broader industry downturn.
The Los Angeles-based company said Thursday that revenue rose 6% year over year to $1.13 billion, slightly below analysts’ expectations of $1.14 billion. That was the slowest growth rate since the company went public in 2017.
Net losses widened 400 percent to $360 million, compared with $72 million a year earlier, roughly in line with expectations. That included $155 million in charges related to a drastic restructuring that included cutting a fifth of its 6,500-strong workforce and reducing investment in initiatives including augmented reality glasses and video content production.
In a letter to investors, Snap, developer of the Snapchat camera and messaging app, said advertisers continue to cut marketing budgets due to macroeconomic headwinds such as inflation and rising capital costs. The company also blamed increased competition and challenges surrounding Apple’s privacy changes, which make it harder for apps to target ads and measure the success of campaigns.
Snap shares, which had already lost 77% of their value this year, fell more than 25% in after-market trading after the earnings release.
The dismal results for Snap, the first of the major tech companies to post earnings, suggest that other businesses that rely on advertising could report similar problems in the coming weeks.
Facebook parent Meta and Google parent Alphabet fell 5 percent and 3 percent, respectively, while smaller social media rival Pinterest fell more than 7 percent after the news.
“While these results are far from our aspirations, we are using this period of reduced demand to move forward and accelerate changes to our ad platform and auction dynamics that we believe will deliver better results for our advertising partners in the long run,” Snap said.
While the company did not provide revenue or earnings guidance for the current quarter due to “uncertainties related to the operating environment,” it said revenue was up 9% in the quarter so far.
Snap said it expects revenue growth to slow by the end of the year. Assuming steady growth, it estimates adjusted earnings before interest, taxes, depreciation and amortization of about $200 million in the fourth quarter.
Evan Spiegel, CEO of Snap, said: “This quarter, we took action to focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, re-accelerating and diversifying our revenue growth and investing in augmented reality. “
Daily active users rose 19% year over year to 363 million, the company said. It also announced a share repurchase program of up to $500 million of its Class A common stock.
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