Snapchat’s growth continued to plateau this quarter as the advertising slump continues for the social media company.
Falling well below most Wall Street estimates, Snap’s said revenue climbed a humble six per cent to $1,13bn, while net losses widened from $72m to $360m.
Adjusted earnings before interest, taxes, depreciation, and amortisation was $73m, compared to $174m in the prior year, showing how the developer of the camera and messaging app is struggling to drive profitability.
“We believe the relatively lower growth rates in these regions reflect the impact of macroeconomic headwinds for a wide variety of industry segments and, as a result, advertising budgets broadly,” Snap said in its investor letter.
Following this bleak outlook, Snap shares plunged by as much as a quarter last night, plunging a further 30 per cent this afternoon.
It has also dragged its Big Tech cousins down with it. Facebook parent Meta and Google parent Alphabet dropped five and three per cent respectively, with investors concerned that the news could spell danger for their quarterly results too. Pinterest dipped seven per cent.
Tech analyst at PP Foresight Paolo Pescatore told City A.M. that Snap needs to be more to drive revenue on its user base. “Once a darling, now Snap fails to generate excitement,” he said.
The firm, which was founded in 2011 and went public in 2017, said it expected the “challenging” landscape to continue in the coming months.
And the company has already taken action to cut down on costs. Snap said in August that it would be culling a fifth of its 6,500-strong workforce, completely restructuring its advertising team.
The downturn for advertising is driven by the wider economic pressures, as well as Apple’s privacy changes, which have meant that it is harder to track and target ads.
Evan Spiegel, co-founder and chief executive of Snap, said that he was confident that the growing user base, which has now hit 363m, will help it navigate the “volatile macroeconomic background”.
Pescatore explained that whilst there is an enhanced focus on ads as we head into a recessionary period, he backed that Snap’s diversified business model would help.