Shares of social media company Snap were down 30 percent in Monday’s extended trading after the company’s CEO Evan Spiegel sent a note to employees informing them that the company will miss its targets for revenue and earnings for the ongoing quarter.
The CEO also added that the company would reduce hiring through the end of the year as part of its strategy to manage its expenditures. The letter was also filed with the US Securities and Exchange Commission (SEC).
In the note, CEO Evan Spiegel wrote that “Today we filed an 8-K, sharing that the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month. As a result, while our revenue continues to grow year-over-year, it is growing more slowly than we expected at this time.”
The company reported its first-quarter earnings results last month. Key margins such as profit, sales, and revenue growth fell short of expectations. Daily users, however, surpassed expectations – the company reported growth of 18 percent YoY. For guidance, the company said it expected between 20% and 25% year-over-year growth in revenue. Snap said it expected adjusted earnings before interest, taxes, depreciation, and amortization of between $0 and $50 million. Snap Inc.’s CEO admitted that “the first quarter of 2022 proved more challenging than we had expected.” According to him, the challenges the company faced were caused by macroeconomic situations as well as advertisers who pulled the brakes on their campaigns after Russia invaded Ukraine back in February.
In the note the CEO sent to employees on Monday, he said that “We believe it is now likely that we will report revenue and adjusted EBITDA below the low end of the guidance range we provided for this quarter.”
Shares of other social media companies were also down following Snap’s announcement. Meta shares declined 7 percent in after-hours trading, while Twitter and Pinterest saw a decline of 4 percent and 12 percent respectively in trading hours.
Although the company will be slowing down on hiring, the company will continue to employ people and expects to hire 500 people by the end of the year, the CEO wrote in his note. In the last twelve months, the company has hired roughly 2,000 people.
The CEO also noted that the company is facing rising inflation, interest rates, and supply chain shortages. Apple’s iPhone privacy feature is also a source of challenge for the company just as the Russia-Ukraine war is taking its toll on the social media company and others. “Our most meaningful gains over the coming months will come as a result of improved productivity from our existing team members,” the CEO wrote.
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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