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Snap Reports Disappointing Third-quarter Results, Shares Plunge 25 Percent

Ibhadojemu Emmanuel by Ibhadojemu Emmanuel
October 21, 2022
in Uncategorised
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Snap saw its shares tumble by 25 percent in Thursday’s extended trading after the company reported disappointing third-quarter earnings results.

Earnings per share reported for the third quarter was 8 cents. Revenue for the quarter came in at $1.13 billion, less than the expectation of $1.14 billion that analysts had forecasted, according to Refinnitiv. Global Daily Active Users (DAUs), however, surpassed analysts’ estimate of 358.2 million, according to StreetAccount. Global Daily Active Users (DAUs) for the third quarter came in at 363 million. 

The company’s third-quarter revenue increased by 6 percent from the previous year. This is the first time since 2017 when it debuted publicly, that the company is reporting single-digit revenue growth. Snap’s net loss surged 400 percent to $360 million, and this can be blamed partly on a $155 million restructuring charge. Daily active users grew 19 percent from the previous year. This means the company is still attracting new users irrespective of the challenges it is facing. Average revenue per user (ARPU) was, however, down 11 percent to $3.11.

In its letter to its investors, the company noted that “Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition. We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital.”

The company also announced that it wouldn’t provide guidance for the fourth quarter, the second consecutive time the company has chosen not to provide guidance. “Forward looking revenue visibility remains incredibly challenging, and this is compounded by the fact that revenue in Q4 is typically disproportionately generated in the back half of the quarter, which further reduces our visibility,” the company said.

In its letter to investors, Snap said that its Snapchat+ subscription service “reached over 1.5 million paying subscribers in Q3 and is now offered in over 170 countries.”

The company noted that it expects revenue growth to keep declining in the fourth quarter as the period “has historically been relatively more dependent on brand-oriented advertising revenue.”

Apple’s privacy update which was introduced in 2021 continues to be a threat to Snap’s advertising business. Also, factors like the economic slowdown, macroeconomic challenges, etc., have led to advertisers halting or reducing their spending on advertising.

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Ibhadojemu Emmanuel

Ibhadojemu Emmanuel

Ibhadojemu Lucky Emmanuel is a graduate of Education and Economics from the University of Benin. He has a passion for tech and business and has been writing professionally for over a period of five years. He's written across various topics and segments and knew tech-business was it when he first stumbled on it. He has a great passion for music and arts, and wants to visit as many countries as he can someday.

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