Despite reporting higher user growth than Wall Street expected, Snap Inc. fell sharply after missing Q2 revenue targets as high inflation and increasing competition from rival apps put a dent in advertising demand. Shares are currently down 26.4% in after-hours trading after rising 5.4% on the day.
Snap’s earnings report affected both Facebook and Meta stocks which also saw drops after market close over concerns of slowed ad revenues.
A bright spot was the company saw a rise in daily active users on Snapchat of 18% year-over-year to 347 million, beating consensus estimates of 344 million users.
“While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect our ambition,” said Evan Spiegel, CEO.
“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.”
Snap Q2 2022 Highlights
- Revenue increased 13% to $1,111 million, compared to the prior year.
- Net loss was $422 million, compared to $152 million in the prior year.
- Adjusted EBITDA was $7 million, compared to $117 million in the prior year.
- Operating cash flow was $(124) million, compared to $(101) million in the prior year.
- Free Cash Flow was $(147) million, compared to $(116) million in the prior year.
Looking ahead, Snap did not provide revenue guidance saying “Forward-looking visibility remains incredibly challenging, and it is unclear how the headwinds we observed in Q2 will evolve as we move through Q3. Given this, we do not intend to provide financial guidance.”
Snap additionally announced a share repurchase program of up to $500 million.
The company announced in May that it planned to slow hiring for the remainder of the year, which it reiterated to investors on Thursday saying it intends to “recalibrate” its investment levels.
Increasing content offering
Snap highlighted its increased investment in augmented reality as well as a growth in content offerings.
“We released our latest version of Lens Studio, which introduces several features to improve Lens capabilities around ray tracing, lighting, shadows, reflections, and depth and expands our API library and Lens Analytics offerings,” it said in a release.
The company added: “We are also working hard to deliver new revenue-generating opportunities, including Spotlight, augmented reality advertising, our Snapchat+ subscription service, and, over time, by monetizing the Snap Map.”
Snap announced earlier this week the introduction of Snapchat for Web to let users send snaps and chat with friends via video calls from their desktops. Initially, Snapchat for Web will be available to Snapchat+ subscribers in the United States, United Kingdom, Canada, Australia, and New Zealand
