Snap stock is down nearly 25% after revenue is hit by shrinking advertisers’ budgets

CNN
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Snap’s bad year continues.

Snap Inc on Thursday reported revenue of $1.13 billion for the three months ending in September, a slight increase of 6% from a year earlier and less than Wall Street expected, as the company faces tightening advertisers’ budgets in an uncertain economy.

In a letter to investors, Snapchat’s parent company said its revenue growth has slowed due to several factors, including increased competition and stress from advertisers that make up its core business.

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

Snap shares were down nearly 25% in after-hours trading following the earnings report.

The Snap report begins what is expected to be a sobering tech earnings period, as layoffs, hiring freezes and other cost-cutting measures become increasingly common in the industry amid fears of a looming recession.

Snap helped unleash a wave of anxiety among tech investors when it warned in May that the economy had worsened faster than expected, lowering its revenue and earnings forecast for the quarter. In late August, Snap announced plans to lay off about 20% of its more than 6,400 global employees, or more than 1,200 employees.

Like other tech companies, Snap has had to contend with headwinds from higher inflation, a stronger dollar, and broader economic turmoil that is prompting some advertisers and consumers to rethink their spending in the United States and abroad.

Snap has also faced increased competition from fast-growing competitors like TikTok, and is still navigating the digital advertising space in the wake of Apple’s privacy changes that made it difficult for marketers to target users with ads.

There were some glimmers of hope 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 expected, but the company nonetheless lost $360 million in the quarter, compared to a loss of $72 million a year earlier. Much of that loss ($155 million) came from restructuring fees related to layoffs.

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

Originally published at San Jose News Bulletin