Snap shares plummeted more than 25% in extended trading on Thursday after the social media company reported disappointing second-quarter results and said it plans to slow hiring as it reckons with weakening revenue growth.
Co-founders Evan Spiegel, the CEO, and technology chief Bobby Murphy agreed to new employment contracts that will keep them in their jobs through at least January 2027.
In its investor letter, Snap said it’s not providing guidance for the third quarter because “forward-looking visibility remains incredibly challenging.” The company said that revenue so far in the period is “approximately flat” from a year earlier. 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 headwinds,” the company said in the letter.
It’s the latest chapter in a tough year for Snap, whose stock has lost almost two-thirds of its value in 2022. In May, Snap said it wouldn’t meet the second-quarter guidance it set the prior month, leading to a 43% plunge in the share price. At the time, Snap cited a macroeconomic environment that was deteriorating much faster than expected.
Snap’s earnings follow the company’s May announcement that it would miss its prior revenue forecast for the quarter.
“The macroeconomic environment has deteriorated further and faster than anticipated,” the company said in a letter filed with the SEC.
Tech stocks have been eviscerated this year, with shares of Amazon down more than 25% and shares of Facebook parent Meta off 45% year-to-date. But even among beaten down tech stocks, Snap is a dog. Shares are off a brutal 65% year-to-date, putting it in the rare company of the likes of Netflix, which is down 63%.
It doesn’t help that Snap is dealing with a cavalcade of negative news including the continued damage caused by Apple’s App Tracking Transparency, which reduces how much data apps can collect on users; a broader slowdown in the advertising space; and headwinds from COVID and the war in Ukraine.
“The revenue miss was certainly disappointing, and I think it sort of confirmed… ad spending is slowing,” Hargreaves Lansdown analyst Laura Hoy told Yahoo Finance Live.
In a bid to raise revenue, Snap announced Snapchat+ subscription service in June. Priced at $3.99, Snapchat+ promises users access to “exclusive, experimental, and pre-release features.”
This month, the company also announced it is bringing Snapchat to desktop computers. That should enable users to access their conversations without having to pull out their phones while sitting at the desks.
Snap’s earnings could serve as a good indicator of the health of the digital ad market in general, and set the stage for earnings reports from the likes of Meta and Alphabet next week.