Snap shares plunge more than 17% on weak forecast
Snap shares tumbled over 17% after the company reported guidance for its current quarter that missed analysts’ expectations.
Here’s how the company did:
- Loss per share: 2 cents vs. 4 cents expected by analysts, according to Refinitiv.
- Revenue: $1.07 billion vs. $1.05 billion expected, according to Refinitiv.
- Global Daily Active Users (DAUs): 397 million vs. 394.9 million expected, according to StreetAccount.
- Average revenue per user: $2.69 vs. $2.68 expected, according to StreetAccount.
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Snap reported second-quarter results that topped analysts’ estimates but provided a weaker-than-expected forecast for the current period.
The company’s overall sales in the second quarter declined 4% from the $1.11 billion it logged in the previous year during the same period. It’s the second straight period of declining year-over-year revenue.
The social messaging business managed to narrow its net loss by 11% to $377.3 million, or 24 cents per share, in its second quarter, which ended June 30, 2023, from $422.1 million, or 26 cents, during the year-earlier period.
Snap also issued financial guidance for the third quarter that it says is “built on the assumption” that the company’s daily active users will reach between 405 million and 406 million. As part of its guidance, Snap expects between $1.07 billion and $1.13 billion in total sales for the third quarter, which it said implies “negative 5% to flat year-over-year growth.”
Analysts were projecting Snap to report third-quarter sales of $1.13 billion along with 406 million daily active users in the same period.
Last quarter, Snap did not provide official guidance for the second quarter, instead disclosing an “internal forecast” for revenue estimates in the time period.
Like many tech companies, Snap initiated a major cost-cutting plan in 2022 that included laying off 20% of the company’s overall workforce of 6,400 at the time. Because of these cuts, Snap wrote in a Tuesday letter to investors that its operating expenses shrank 8% year-over year in the second quarter, reaching $615 million. As of June 30, 2023, the company had 5,286 full-time workers, according to the letter.
“We are excited by the progress we have made delivering increased return on investment for our advertising partners, growing our community to 397 million daily active users, and reaching more than 4 million Snapchat+ subscribers,” Snap CEO Evan Spiegel said in a statement.
Snap announced its Snapchat+ subscription plan in June 2022, pitching it as a way for users to access exclusive features and updates for a monthly fee of $3.99.
Analysts are following Snap’s earnings for any signs of a recovery in the digital advertising market, which could be experiencing a modest rebound, according to several industry surveys. A recent William Blair survey, for instance, noted that while the overall online advertising market “is still soft,” the overall macro economy is “not as volatile, leading to a slow rebound in digital ad spend.”
Facebook parent Meta reports its second-quarter results on Wednesday, following the company’s first quarterly increase in revenue after three straight periods of decline. At the time, Chief Financial Officer Susan Li said the company would still be experiencing “a volatile macro environment” for the rest of the year, in addition to a “challenging regulatory environment.”
Snap executives will address analysts and investors on an earnings call beginning at 5:30 p.m. ET.
Watch: Ad revenue, cost-cutting and cloud will shape Google’s earnings
This photo illustration created on Jan. 7, 2025, in Washington, D.C., shows an image of Mark Zuckerberg, CEO of Meta, and an image of the Meta logo.
Drew Angerer | AFP | Getty Images
Meta’s core online advertising business could take a $7 billion hit this year due to President Donald Trump’s tough China tariffs impacting retailers in the country.
That’s according to a MoffettNathanson research note published Tuesday that analyzes the potential impact of China-linked retailers like Temu and Shien slashing their Facebook and Instagram advertising budgets amid the U.S. and China trade dispute.
The MoffettNathanson analysts pointed to Meta’s latest annual report in which the company revealed that its China revenue was $18.35 billion in 2024, equating to a little over 11% of total its total sales. Like other analysts, MoffettNathanson believe Temu and Shien comprise the bulk of Meta’s China business, and if those online retailers cut back on their ad campaigns this year, the social networking giant’s 2025 ad sales could be impacted by $7 billion.
Meta did not immediately respond for a request for comment.
There are already signs of a pullback, the analysts wrote, citing a CNBC report about Temu reducing its U.S. advertising spending and seeing a big drop in its Apple App Store rankings following Trump’s China tariffs.
“China’s importance to Meta’s business cannot be overstated,” the analysts wrote in the note. “While Meta does not provide a country-level breakdown of revenue within Europe, we logically can presume that China is Meta’s second-largest revenue source after the United States — a remarkable position for a country where Meta has no users or active platforms.”
Meta could be in even more trouble if the broader markets heads into a recession this year, as some analysts and corporate financial chiefs have predicted. A “truly prolonged economic downturn” combined with the U.S. and China trade dispute “could wipe $23 billion in 2025 advertising revenues off Meta’s books and crush our 2025 earnings by -25%,” the analysts said.
“As noted earlier, we believe Meta is particularly exposed to a pullback in ad spend from Chinese advertisers,” the analysts said. “In a scenario where a recession is triggered or exacerbated by escalating trade tensions, Meta would face a dual headwind: cyclical advertising weakness and a targeted decline in Chinese ad spend.”
The MoffettNathanson analysts still maintain a Buy rating on Meta, said they have but decreased their target price by $185 to $525.
Meta shares have dropped about 19% to $499.36 since Trump was officially sworn in as U.S. president for the second time.
The company reports its first-quarter earnings next Wednesday.
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