Shares of Snapchat-parent Snap took a major hit, tumbling as much as 16% in after-hours trading on Tuesday, following the company’s disappointing financial results for the June quarter. The social media giant reported a steep net loss of $377 million, although it showed some improvement compared to the $422 million net loss during the same period last year. However, this loss was significantly worse than the $66 million loss projected by Wall Street analysts.
In addition to the troubling loss figures, Snap also experienced its second-ever decline in sales, with revenues falling nearly 4% from the previous year to $1.07 billion. This marks the second consecutive quarter that the company has reported declining sales. To make matters worse, Snap warned investors that its sales could continue to decline for a third consecutive quarter in the upcoming September quarter.
The company’s weak outlook has raised concerns about the state of digital advertising spending in the current operating environment. Investing.com senior analyst Jesse Cohen commented in an emailed statement, stating that Snap’s struggles could be indicative of both corporations and small businesses cutting back on their digital advertising expenditures.
However, amid the bleak financial results, there were a few bright spots for the company. One of the positive highlights from the report was Snapchat’s daily active user count, which showed impressive growth of 14% year-over-year, reaching a total of 397 million users. This steady increase in user engagement could provide some hope for Snap’s future performance.
Furthermore, Snap announced last month that its Snapchat+ subscription service had gained over 4 million paying customers within its first year, indicating potential growth in alternative revenue streams beyond advertising.
Despite these glimmers of hope, Snap has been grappling with challenges resulting from changes made to Apple’s app tracking system, which impacted ad targeting for several social media platforms. However, Snap’s recent statement suggested that improvements in its machine learning systems for ad targeting had resulted in more relevant ads, potentially helping to mitigate some of these issues.
Investors and analysts will closely monitor Snap’s performance in the coming quarters to see if the company can turn around its financials and navigate through the challenges posed by the evolving digital advertising landscape. As the company looks ahead to the September quarter, it has projected revenue between $1.07 billion and $1.13 billion, indicating a possible 5% decline from the same period the previous year. Time will tell whether Snap can rebound and regain its position in the competitive social media landscape.
source – Cnn