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Shares of Snap fell more than 25% in extended trading Thursday after the social media company reported disappointing second-quarter results and said it plans to slow hiring as it worries about weakening revenue growth.
Co-founder Evan Spiegel, CEO and chief technology officer Bobby Murphy agreed to new employment contracts that will keep them in their jobs until at least January 2027.
Here’s how the company did it:
- Earnings per share: An adjusted loss of 2 cents, versus an expected loss of 1 cent, according to a Refinitiv poll of analysts
- Income: $1.11 billion vs. $1.14 billion expected, according to Refinitiv
- Global Daily Active Users (DAU): 347 million vs. 344.2 million expected, according to StreetAccount
In the investor letter, Snap said it is not providing guidance for the third quarter because “the long-term outlook remains extremely challenging.” The company said year-to-date revenue is “roughly flat” from a year ago. Analysts were expecting sales growth of 18% for the third quarter, according to Refinitiv.
“We are not satisfied with the results we are delivering, regardless of the current winds,” the company’s letter said.
It’s the latest chapter in a difficult year for Snap, whose stock has lost almost two-thirds of its value in 2022. In May, Snap said it would miss the second-quarter guidance it set last month, leading to a 43% drop in the share price. At the time, Snap cited a macroeconomic environment that was deteriorating much faster than expected.
Even with the reduced guidance, Snap still missed estimates. Revenue rose 13% from a year earlier, while analysts were expecting a 16% rise.
“The second quarter of 2022 turned out to be more challenging than we expected,” Snap said in the investor letter. The company said it now plans to “significantly slow our hiring rate as well as the rate of growth in operating expenses.”
Snap attributed its disappointing results to slowing demand for its online advertising platform. Additionally, a challenging economy, Apple’s iOS 2021 update, and increased competition from companies like TikTok have caused marketers to pull back on their spending.
Snap said that even some relatively healthy businesses were holding back on their commitments due to “input cost pressures due to inflation”.
“In some high-growth sectors, businesses are reassessing investment levels amid the rising cost of capital, which is further reflected in campaign budgets and the level of bids for action,” Snap said.
Snap also announced a share repurchase program of up to $500 million. And for their new employment contracts, Spiegel and Murphy will receive an annual salary of $1 and no equity compensation.
Earlier this week, Snap debuted Snapchat for Web, a desktop version of the Snapchat mobile app that people can use to send messages and make video calls with their Snap contacts.
Snap unveiled the new desktop app shortly after debuting its Snapchat+ paid subscription plan, which costs $3.99 a month and lets people access early features and see who’s seen Snaps Theirs.
Investors will soon have a clearer picture of the online advertising environment. Twitter is set to report results on Friday morning, followed by Alphabet and Meta next week.
Shares of Meta and Pinterest fell 5% in after-hours trading Thursday, while shares of Alphabet fell 2.9% and Twitter fell 1.5%.
Snap’s market cap peaked at $136 billion in September. Based on after-hours prices, the company is now worth $20 billion.
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