The owner of Snapchat falls short of earnings predictions as it shifts focus to user growth in ‘monetizable’ markets such as North America and Europe
Snapchat’s owner narrowly missed Wall Street’s expectations amid a slowdown in digital advertising, causing shares in the social media company to drop by nearly a third. While Snap expressed being “encouraged by the progress we are making,” it cited factors like the Middle East conflict that impacted its business.
Snap’s sales increased by 5% to $1.36 billion in the three months ending on December 31, which fell short of analysts’ expectations of $1.38 billion. Net losses decreased from $288 million to $248 million. Despite this, investors remained worried about its growth. The company projected revenue between $1.1 billion and $1.14 billion for the current quarter, while analysts had anticipated around $1.1 billion.
During after-hours trading in New York, Snap’s stock plummeted by 30% to $12.21. Meanwhile, Alphabet, the parent company of Google and YouTube, and Meta Platforms, the owner of Facebook and Instagram, have been performing better. Smaller players in the market are still facing challenges. Snap, headquartered in Santa Monica, California, ended 2023 with approximately 414 million daily active users and anticipates this number to increase to 420 million in the first quarter.
The company informed investors on Tuesday that it is redirecting “more of our attention towards increasing user growth and enhancing engagement in our most lucrative regions, such as North America and Europe.” Evan Spiegel, CEO of Snap, stated, “2023 was a crucial year for Snap as we overhauled our advertising business and continued to grow our global community, reaching 414 million daily active users. It has 7 million subscribers who pay for its Snapchat+ premium product.”
Snapchat strengthens connections with friends, family, and the world, and this distinct value proposition has laid a robust foundation for our long-term business growth. It unveiled its earnings one day after revealing plans to reduce its global workforce by approximately 10%, or about 530 employees, as part of a restructuring aimed at “minimizing hierarchy and encouraging in-person collaboration.” Last week, the company recalled its Pixy selfie drone due to the fire hazard posed by an overheating battery.