Shares of Snap Inc. (SNAP.US) plummeted by approximately 21% in response to the company's weak quarterly results and technical issues with its advertising platform, which slowed advertising revenue growth. In its report, Snap said that revenue grew only 8.7% year-over-year, which is significantly weaker than previous quarters with double-digit revenue growth. Technical issues caused ads to be displayed at reduced prices, which significantly reduced the platform's effectiveness and discouraged advertisers. As a result, some customers are shifting their advertising budgets to competing services such as Meta and Reddit, which offer a better return on marketing investment.
In addition, in a strategic context, Snap faces growing competition related to the use of artificial intelligence by other players in the social media market. The decline in shares is significant as investors recalculate the risks associated with maintaining growth momentum after several quarters of solid results. Snap currently faces not only technological but also market challenges that could limit its short-term profitability. The company has already experienced periods of losses and signaled the possibility of a lack of sustainable profitability, which further reinforces investor uncertainty today.
The company's Q2 results:
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Total revenue: $1.35 billion, up 9% year-over-year, in line with the forecast of $1.35 billion.
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Advertising revenue: $1.17 billion, up 4% year-on-year (the forecast was not specified).
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Other revenue (primarily from Snapchat Plus subscriptions): $171 million, up 64% year-over-year.
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Earnings per share (EPS): -$0.16, slightly below the forecast of -$0.15 (6.67% lower).
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Adjusted EBITDA: $41 million, down from $55 million in the previous year and forecasts of approximately $53 million.
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Net loss: $263 million, slightly higher than the $249 million loss a year earlier.
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Monthly active users: 932 million, up 7% year-over-year.
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Daily active users: 469 million, up 9% year-over-year.
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Cash flow from operating activities: $88 million (compared to -$21 million a year earlier).
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Free cash flow: $24 million (previously -$73 million year-on-year).
Source: xStation
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