Snap stock plunges 15% as revenue growth stalls
By Clare Duffy, CNN
Snapchat’s parent company reported stalled revenue growth and a large net loss for the final three months of 2022, as it confronts tighter advertiser budgets amid broader economic uncertainty.
Snap’s quarterly revenue was just shy of $1.3 billion, essentially flat from the year prior. For the full year, Snap’s revenue grew 12%, a slower rate that the company attributed to “rapid deceleration in digital advertising growth.”
The situation appears to be even worse in the current quarter. Snap said it has already seen a roughly 7% revenue decline so far in the first quarter compared to the year prior. It estimates revenue for the first three months of the year will be down between 2% and 10% compared to the previous year. (Those figures were included in an investor letter, despite Snap saying it would not provide specific guidance for the quarter.)
Meanwhile, Snap posted a net loss of more than $288 million in the quarter, compared to the $22.5 million in net income it earned in the same period a year ago.
Snap shares fell as much as 15% in after-hours trading following the report.
The report marked the fourth straight quarter of net losses for Snap, which has suffered from increased competition in the social media market, disruptions to its ad business from Apple’s app privacy changes and weaker advertiser demand amid fears of a looming recession. High interest rates and inflation have also impacted many large tech firms.
Snap’s earnings could be a concerning bellwether for the other tech giants that rely on the health of the digital ad market, including Facebook-parent Meta and Google-parent Alphabet, both of which are set to report results this week.
Shares of Meta and Alphabet dipped slightly in after-hours trading Tuesday following Snap’s results.
Snap in August became one of the first big tech firms to announce major layoffs when it said it would cut 20% of its staff. A slew of other tech companies have followed suit in recent months, including Meta, Alphabet, Amazon, Mircrosoft and others, resulting in tens of thousands of job losses in the industry.
In addition to challenges in the digital advertising market, Snap pointed to a change to its ad platform that it expects “will drive improvement for our partners and our business over time, but that may be disruptive… in the near term.”
Perhaps the lone bright spot for Snap in the results is its audience. The company reported having 375 million daily active users in the quarter, an increase of 17%. Snap’s subscription service Snapchat+, which launched last year in an attempt to grow new revenue sources, reached more than 2 million paying subscribers in the fourth quarter, it said.
The company also said it expects to realize the $500 million in cost reductions it had promised as a result of its restructuring by the end of the first quarter.
Still, Scott Kessler, an analyst for investment firm Third Bridge, said in an investor note following the report that, “one of the big questions about Snap is whether it remains a growth story or can soon continue as a growth story,” given its gloomy outlook for the start of this year.
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