Snap Inc. reduces losses but expectations are disappointing, leading to lower market
(MENAFN) Snap Inc., the parent company of Snapchat, managed to reduce its losses to USD249 million in the second quarter of this year, down from USD377 million in the same period last year. However, the company’s forecast for the current quarter fell short of market expectations, leading to a significant drop of over 17 percent in its share price during after-hours trading following the New York Stock Exchange's close on Thursday.
Despite Snapchat's popularity among teenagers and impressive user growth, the company continues to face challenges in attracting advertisers and investors. The social network reported that it now has 432 million daily users and 850 million users at least once a month. Its paid subscription service, Snapchat+, which leverages generative AI, has seen a rise in subscribers to 11 million from 7 million at the end of 2023.
In the first quarter, Snap’s sales volume grew by 21 percent, surpassing expectations and temporarily boosting investor confidence. However, the company's revenue for the second quarter was USD1.24 billion, up 16 percent, and its forecast for the third quarter, ranging between USD1.34 and USD1.38 billion, was below market expectations. Jasmine Enberg from eMarketer noted that while Snapchat+ subscriber growth was strong, it did not offset concerns about weak growth in Snap’s core advertising business, especially given the increased number of active advertisers.
Unlike competitors such as Meta, which owns Facebook and Instagram, Snap has struggled to generate sufficient advertising revenue to achieve annual profitability. Earlier this year, Snap announced a reduction in its workforce by 10 percent, or approximately 500 employees, following a previous 20 percent cut in the summer of 2022, which had resulted in more than 1,200 job losses.
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