Snap misses on Q2 revenue, shares plunge 23%

·Technology Editor

Updated Thu, Jul 21, 2022, 1:17 PM3 min read

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Snapchat parent Snap (SNAP) reported its Q2 earnings after the closing bell on Thursday, missing Wall Street's expectations and sending shares plunging 23% in after hours trading.

Here’s how the company performed in the quarter compared to what analysts were looking for, as compiled by Bloomberg.

Revenue: $1.11 billion versus $1.14 billion expected
Adjusted EPS: -$0.02 versus -$0.05 expected
Daily active users: 347 million versus 343.2 million expected

Average revenue per Snap user fell 4.5% year-over-year, and the company said it wasn't providing Q3 guidance given the current financial climate.

“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," CEO Evan Spiegel said in a release.

"We are evolving our business and strategy to reaccelerate 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 topline growth."

“The revenue miss was certainly disappointing, and I think it sort of confirmed... ad spending is slowing,” @HLInvest Equity Analyst @laura_h_says says on $SNAP earnings. “It’s getting much more challenging for these social media companies to get advertisers to spend with them.” pic.twitter.com/DBUAsFUzWC
— Yahoo Finance (@YahooFinance) July 21, 2022

Snap’s earnings follow the company’s May announcement that it would miss its prior revenue forecast for the quarter.

“The macroeconomic environment has deteriorated further and faster than anticipated,” the company said in a letter filed with the SEC.

Tech stocks have been eviscerated this year, with shares of Amazon down more than 25% and shares of Facebook parent Meta off 45% year-to-date. But even among beaten down tech stocks, Snap is a dog. Shares are off a brutal 65% year-to-date, putting it in the rare company of the likes of Netflix, which is down 63%.

It doesn’t help that Snap is dealing with a cavalcade of negative news including the continued damage caused by Apple’s App Tracking Transparency, which reduces how much data apps can collect on users; a broader slowdown in the advertising space; and headwinds from COVID and the war in Ukraine.

“The revenue miss was certainly disappointing, and I think it sort of confirmed... ad spending is slowing,” Hargreaves Lansdown analyst Laura Hoy told Yahoo Finance Live.

In a bid to raise revenue, Snap announced Snapchat+ subscription service in June. Priced at $3.99, Snapchat+ promises users access to "exclusive, experimental, and pre-release features."

This month, the company also announced it is bringing Snapchat to desktop computers. That should enable users to access their conversations without having to pull out their phones while sitting at the desks.

Snap’s earnings could serve as a good indicator of the health of the digital ad market in general, and set the stage for earnings reports from the likes of Meta and Alphabet next week.

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