Snap’s rough year continues.
Shares of Snapchat’s parent company tanked more than 25% in after-hours trading Thursday after it posted even worse sales growth results for the three months ended in June than it had expected.
Snap (SNAP) last month warned investors that the economy had worsened faster than it expected, and said its revenue growth would likely be at the low end of its previous guidance, or around 20%. On Thursday, the company said revenue grew just 13% to $1.1 billion during the quarter.
Snap also posted a quarterly net loss of $422 million, compared to a $152 million loss in the same quarter last year. And daily active users grew 18% year-over-year to more than 347 million, a five percentage-point slowdown in growth rate from the year prior.
In a letter to investors on Thursday, the company pointed to “a series of significant headwinds,” including broader issues with the economy and “increasing competition for advertising dollars that are now growing more slowly.” It also hinted at the impact of changes to the Apple app store’s tracking practices, which have upended much of the digital advertising world.
“The second quarter of 2022 proved more challenging than we expected,” the company said in the letter to investors. “While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect the scale of our ambition. We are not satisfied with the results we are delivering, regardless of the current headwinds.”
The company also declined to offer financial guidance for the current quarter, citing “uncertainties related to the operating environment.” However, the company noted in its shareholder letter that it expects daily active users in the third quarter to be around 360 million, which would mark around 18% year-over-year growth, a deceleration in growth from the prior-year quarter. It added that thus far in the third quarter, revenue is approximately flat on a year-over-year basis.
Even before the latest stock plunge, the company was struggling on Wall Street. Snap’s stock was already down 65% since the start of this year, after it also missed sales and profit estimates for the first quarter.
“We are working to reaccelerate growth and take share [in the digital ad market], but we believe it will likely take some time before we see significant improvements,” Snap said in Thursday’s investor letter.
In an effort to fuel faster growth, the company said it plans to find new sources of revenue, in addition to investing in its existing products and platforms and its direct-response advertising business.
Snapchat last month launched a subscription service called Snapchat+ that could represent a new revenue driver for the company. And last week, it launched a web-based version of the platform, available for now mostly to Snapchat+ subscribers, as a way to drive users to the new platform.
Snap said Thursday it also plans to “substantially” slow its rate of hiring and operating expense growth by reprioritizing “goals and initiatives across the company.” The company’s board on Thursday authorized a share repurchase program of up to $500 million in Class A stock, which Snap said could help offset some dilution of it share price.