Snap Inc. CEO Evan Spiegel walks into a morning session at the Allen & Company Sun Valley Conference on July 07, 2021 in Sun Valley, Idaho.
Kevin Dietsch | Getty Images
Instantaneous Shares fell more than 25% in extended trading on Thursday after the social media company reported weaker-than-expected third-quarter revenue. This is Wall Street’s first spike in the current state of the struggling online advertising market.
Here are the key numbers.
- Earnings per share: 8 cents, adjusted, vs. a small loss just short of the expected breakeven, according to a Refinitiv survey of analysts
- Revenue: $1.13 billion vs $1.14 billion expected, according to Refinitiv
- Global Daily Active Users (DAU): 363 million against 358.2 million expected, according to StreetAccount
Snap’s third-quarter revenue rose 6% from a year earlier, the first time it has dipped in single digits since the company’s public market debut in 2017. Meanwhile , even as it announced a surprise adjusted profit, Snap’s net loss jumped 400% to $360 million. , partly due to a restructuring charge of $155 million.
Daily active users grew by 19% year over year, showing that the company is still able to attract people to the service despite the difficulties on the business side. Average revenue per user (ARPU) fell 11% to $3.11.
In August, Snap announced it would lay off 20% of the company’s roughly 6,000 employees as part of a major restructuring plan. Severance and related costs constituted a large portion of the restructuring charge for the period.
“Our revenue growth continued to slow in the third quarter and continues to be impacted by a number of factors that we have noted over the past year, including platform policy changes, headwinds macroeconomics and increased competition,” Snap said in its letter to investors. “We are seeing our advertising partners across many industries shrink their marketing budgets, particularly in the face of operating environment headwinds, inflation-induced cost pressures and rising capital costs.”
Snap also said it would not provide guidance for the fourth quarter, marking a second straight period in which it opted out of providing guidance.
“Forward-looking revenue visibility remains incredibly challenging, and this is compounded by the fact that fourth quarter revenue is typically generated disproportionately in the second half of the quarter, further reducing our visibility,” the company said.
Snap added that revenue growth is expected to continue to slow in the fourth quarter, as this period “has historically been relatively more dependent on brand-driven ad revenue,” which has been declining over the past period.
Apples The 2021 privacy update for iOS remains an obstacle to Snap’s ability to track users across the web, weakening its online advertising business. Rival social media companies, including Facebook, have also been hit by Apple’s changes. Parent Facebook Meta publishes its quarterly results next week.
The economic downturn and the potential for a recession have also led many advertisers to suspend or reduce spending on their campaigns.
Snap shares have lost more than three-quarters of their value this year and are down more than 30% since July, when the company reported second-quarter results that missed the top and bottom results. If the action closed Friday at its after-market level, it would be at its lowest since the start of 2019.
Similar to the second quarter, Snap’s board of directors authorized a stock buyback program of up to $500 million. The company had $4.4 billion in cash, cash equivalents and marketable securities as of September 30.
Snap said during the quarter that as part of its cost-cutting plan, it would shut down several expensive projects, including its Pixy drone, which it planned to sell for $230. Snap also ended production of its premium Snap Originals shows.
In Thursday’s statement, Snap said its Snapchat+ subscription service “reached more than 1.5 million paid subscribers in the third quarter and is now offered in more than 170 countries.” Snap launched the subscription service in June to give users access to exclusive and preview features for $3.99 per month.
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