The tech sector rallied broadly on Thursday, with the Nasdaq ending the session up 1.4%, until Snap (SNAP) sharply dented sentiment with its quarterly results. The Snapchat owner posted its weakest-ever quarterly sales growth as a public company, with revenue that increased just 13% in Q2 (7 percentage points below the low end of its April forecast).
Net losses swelled by 178% Y/Y to $422M, prompting shares to plunge 27% in extended trading, after losing nearly three-quarters of their value over the past year. Bigger picture: Macroeconomic conditions and rising inflation are seeing companies pull back on advertising spend, while changes to Apple’s (AAPL) privacy policy have also slammed digital-ad-focused businesses.
Snap has tried to search for new sources of revenue, including paid and premium services, but noted that it “was not satisfied with the results we are delivering.” The company also didn’t issue guidance for the current quarter, though it will “substantially” reduce its hiring rate and tightly control operating expenses. “While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect our ambition,” announced CEO Evan Spiegel.
“We are evolving our business and strategy to re-accelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our top-line growth.” Outlook: Snap’s results come ahead of earnings from Twitter (TWTR) this morning. Other heavy hitters in the digital ad market, like Google parent Alphabet (GOOGL) and Meta Platforms (META), will report next week
