Snap misses revenue estimate, shares plunge 30%
SNAP missed Wall Street estimates for quarterly revenue on Tuesday (Feb 6), as the Snapchat owner continued to struggle to compete against larger rivals for digital advertising revenue, sending its shares down 30 per cent.
Tech giants such as Facebook owner Meta Platforms and Alphabet command more attention from advertisers due to vast amounts of data to target ads, and both have cut staff over the past year to control costs.
Snap announced on Monday it would lay off 10 per cent of staff, or 528 employees, in order to “invest incrementally” in the company’s growth over time.
Revenue in the fourth quarter ended Dec 31 was US$1.36 billion, missing the consensus analyst estimate of US$1.38 billion, according to LSEG data.
On the other hand, Meta’s advertising sales surged 25 per cent in the December quarter. Google’s ad business grew 11 per cent as ad sales from YouTube increased 16 per cent in the same period, and Amazon recorded a 27 per cent jump in ad sales.
Snap’s shares plunged 30 per cent to US$12.05 in trading after the bell on Tuesday.
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In a letter to shareholders, Snap said it would shift more of its focus this year to increasing Snapchat’s user base and investing in markets where the tech company earns the most money, including North America and Europe.
Snap’s user numbers in North America were stagnant in the fourth quarter, while users in Europe grew by just four million compared with the previous year.
Daily active users totalled 414 million in the fourth quarter, beating analyst estimates of 411.6 million.
Most of the growth occurred in regions outside North America and Europe, which generate less advertising revenue.
The company forecast first quarter revenue between US$1.1 billion and US$1.14 billion. Analysts were expecting US$1.1 billion.
The Santa Monica, California-based company said it expects the number of daily users will grow to 420 million in the first quarter. REUTERS
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