Snap’s earnings missed estimates for the second quarter on the top and bottom lines, sending shares lower.
Snap ( SNAP ) reported an adjusted loss of two cents on revenue of $1.11 billion. Analysts had expected a loss of 1 cent on revenue of $1.14 billion.
Snapchat’s parent company also declined to provide guidance for the third quarter and said it would “significantly slow our hiring pace as well as our operating expense growth rate.”
SNAP shares fell 26% to around 12.10 in stock market trading today.
“While the continued growth of our community increases the long-term opportunities for our business, our second quarter financial results did not reflect our ambition,” CEO Evan Spiegel said in written notes to Snap’s earnings announcement.
Spiegel said the disappointing results were due to a slowdown in demand for its online advertising platform.
“We are evolving our business and strategy to re-accelerate revenue growth, including innovating our products, investing heavily in our direct response advertising business and cultivating new revenue streams to help diversify our top line growth” , he said.
Snap and other social media companies get about 97% of their revenue from advertising, which has slowed over the past year.
In late trading on other social media shares Thursday, Facebook owner Meta Platforms ( META ) fell 4.7%. Also, Pinterest ( PINS ) fell 6.9%, while Etsy ( ETSY ) fell 3.1%.
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Signs of advertising weakness emerged when Snap reported its first-quarter results on April 21. This report, while showing a small gap in the top and bottom lines, came with a caveat.
Challenges achieving instant profits
Advertisers in a wide variety of industry groups report macro work environment concerns. These concerns include continued supply chain disruptions, rising raw material costs, economic concerns due to rising interest rates, and concerns related to geopolitical risks stemming from the war in Ukraine.
Another big issue is that Apple ( AAPL ) changed ad tracking in its operating system. Users gained more privacy, but advertisers lost valuable user tracking data. The shift cost social media stocks billions in lost revenue.
“SNAP’s commentary on prospective advertiser demand amid geopolitical conflict, supply chain and inflation-driven headwinds will be key,” Cowen analyst John Blackledge said in a client research note ahead of Snap’s earnings report.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more information on tech stocks, analysis and financial markets.
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