Snap shares sink 30% as revenue falls short of Wall Street expectations

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Snap shares plunged by more than 30 per cent after-hours trading on Tuesday after its quarterly revenue growth fell shy of Wall Street expectations, as it continues to struggle to recover from a downturn in digital advertising.

Compared with dominant, deep-pocketed rivals such as Meta, the smaller Los Angeles-based social media platform has battled to rebound from a digital advert slump that began in 2022 when tough macroeconomic conditions caused marketers to tighten their belts. It was also among the hardest hit by the privacy changes introduced by Apple in 2021, which disrupted the way brands target advertising and measure their effectiveness.

Coming a day after announcing sweeping lay-offs, Snap said its revenues increased 5 per cent to $1.36bn in the fourth quarter, below expectations of a rise to $1.38bn. This reflected “a challenging operating environment”, it said in a letter to investors.

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In its letter, Snap said it had made progress on wielding machine learning to boost its advertising performance for brands, and that it had succeeded in increasing the number of small and medium-sized advertisers in particular.

However, it estimated that “the onset of the conflict in the Middle East was a headwind to year-over-year growth of approximately 2 percentage points” in the fourth quarter.

Net losses narrowed to $248mn from $288mn the previous year, compared with consensus estimates of a decrease to $277mn. 

In the current quarter, its guidance for revenues was between $1.095bn- $1.135bn, or growth of between 11-15 per cent. Current consensus revenue estimates stand at $1.12bn, according to S&P Capital IQ.

“We are shifting more of our focus toward user growth and deepening engagement in our most highly monetisable geographies, including North America and Europe,” the letter to investors said.

The results contrast dramatically with those of Meta, whose shares last week leapt 20 per cent after beating revenue and earnings expectations and the announcement of its first-ever quarterly dividend of 50 cents per share.

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Snap on Monday said it would cut its headcount by about 10 per cent, or more than 500 employees, its second restructuring in as many years. It said it would incur pre-tax charges of $55mn-$75mn, primarily severance and related costs, mostly in the first quarter.

Source: https://www.ft.com/content/9b04ee81-f30b-4ce1-a324-d67dc81163b5