Published - October 21, 2022 @ 2:18 PM (EET)
Shares of Snap (NYSE:SNAP) plunged over 26% in after-hours trading Thursday after posting a further slowdown in sales growth and signaling the digital-ad market could remain lackluster for some time in a disappointing third-quarter report.
The social media company said third-quarter sales increased only 6% to $1.13 billion, the slowest growth rate since going public in 2017 and below the 8% figure it had anticipated in August.
Before Thursday's release, Snap shares were already the worst performer in the industry, down more than 85% year-to-date.
QUARTERLY DETAILS
Facing a weakening macroeconomic environment, increased competition, and platform policy changes, Snap declined to provide guidance, marking a second consecutive period in which it has chosen not to offer a forecast.
Meanwhile, the company beat user growth forecasts, with daily active users increasing 19% year-over-year to 363 million, proving the company still manages to attract people to the service despite its business struggles.
Operating margin fell to $56 million compared with $72 million from the prior year, while free cash flow dipped from $52 million to $18 million, in large part due to restructuring.
In August, Snap announced it was cutting 20% of its workforce, refocusing its business, and slashing projects that don't add to user or revenue growth.
In the quarter, Snap posted a net loss of $360 million, including $155 million in restructuring costs.
Turning to other operating metrics, Snap grew its developing subscription service, Snapchat+, to 1.5 million users who pay for early access to exclusive or pre-release features.
Daily average time spent for older (35 and up) Snapchatters rose by more than 40% year-over-year, while total time spent watching Spotlight is up 55%.
Like in its previous quarter, the social app company authorized a stock repurchase program of up to $500 million in class A common stock to offset some losses from issuing restricted stock units to employees.
NOW WHAT
Soaring inflation is adding pressure on all social platforms, including industry-leading Meta's Facebook (NASDAQ:META) and Alphabet's Google (NASDAQ:GOOGL), which is set to report results next week.
These companies are also up against fierce competition for ads, particularly from TikTok, which invested heavily to boost the short-video app.
Following Snap's report, Shares of Meta, Alphabet, and Pinterest Inc., another advertising-reliant site, all fell in after-market trading.
