Snap shares fall nearly 25% after Q3 earnings release

Snap on Thursday reported revenue of $1.13 billion for the three months ended in September, a slight 6% increase from a year earlier and less than Wall Street had expected as the company grappled with budgets. from advertisers in an uncertain economy.

In a letter to investors, Snapchat’s parent company said its revenue growth was slowed by a number of factors, including growing competition and nervousness from advertisers that make up its core business.

“We are finding that our advertising partners in many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures and rising costs,” the company said in the letter.

Snap shares are down nearly 25% in after-hours trading following the earnings report.

Snap’s report kicks off what is expected to be a troubling period of tech gains, as layoff announcements, hiring freezes and other cost-cutting measures have become increasingly common in the industry amid fears of a recession. imminent.

Snap helped spark a wave of anxiety among tech investors when it warned in May that the economy had deteriorated faster than expected, lowering its revenue and profit forecast for the quarter.

In late August, Snap announced plans to lay off about 20% of its more than 6,400 global employees, or more than 1,200 employees.

Like other tech companies, Snap has had to face headwinds of rising inflation, a stronger dollar and broader economic jitters that are prompting some advertisers and consumers to rethink their spending in the United States and abroad.

Snap has also faced increasing competition from fast-growing competing platforms such as TikTok, and is still navigating its digital ad business after Apple-implemented privacy changes that made it harder for marketers to target users with ads.

There were some glimmers of hope in the Snap report, including that the number of daily active users grew 19% year-over-year, reaching 363 million in the third quarter.

Its net loss was also smaller than Wall Street had expected, but the company still lost $360 million in the quarter, compared with a loss of $72 million a year earlier. Much of that loss ($155 million) came from restructuring charges related to layoffs.

Snap declined to provide a financial projection for the final three months of the year. In its letter to investors, the company said, “We expect the operating environment to remain challenging in the coming months and we believe the actions we are taking provide a clear path forward for Snap.”