Snap stock is down nearly 25% on revenue hit by cutbacks in advertiser budgets



CNN

Snap’s bad year continues.

Snap on Thursday reported revenue of $1.13 billion for the three months ended September, a slight 6% increase from a year earlier and less than Wall Street had expected as the company grapples with tightening advertiser budgets in an uncertain economy.

In a letter to investors, Snapchat’s parent company said its revenue growth had been slowed by a number of factors, including growing competition and concerns from advertisers that make up its core business.

“We are finding that our advertising partners across many industries are reducing their marketing budgets, particularly in the face of operating environment headwinds, inflation-driven cost pressures and rising costs,” the company said in the letter.

Shares of Snap fell nearly 25% in after-hours trading after the earnings report.

Snap’s report kicks off what will be a sobering period for tech earnings, as layoff announcements, hiring freezes and other cost-cutting measures have become increasingly common in the industry amid fears of a recession.

Snap sparked a wave of anxiety among tech investors when it warned in May that the economy had worsened faster than expected, cutting its revenue and profit forecasts for the quarter. In late August, Snap announced plans to lay off more than 6,400 of its global workforce, or up to 1,200 employees.

Like other tech companies, Snap has faced headwinds from rising inflation, a stronger dollar and broader economic concerns that have some advertisers and consumers rethinking spending in the United States and abroad.

Snap has faced increasing competition from growing rivals like TikTok, and is still navigating its digital ad business in the wake of privacy changes imposed by Apple that have made it harder for marketers to target users with ads.

There were some bright spots in Snap’s report, including that the number of daily active users grew 19% year over year to 363 million in the third quarter. Its net loss was also less than Wall Street had expected, but the company still lost $360 million in the quarter, compared with a loss of $72 million a year earlier. A large portion of that loss ($155 million) came from restructuring charges related to layoffs.

Snap declined to provide funding for the last three months of the year. In the letter to investors, the company said, “We expect the operating environment to remain challenging in the coming months and we believe the actions we are taking provide a clear path forward for Snap.”