Snap’s revenue for the quarter was $1.34 billion, just below the $1.35 billion anticipated by analysts polled by LSEG
SAN FRANCISCO: Snap Inc. shares dropped 15% Tuesday after the company reported second-quarter earnings that fell short of revenue and key advertising targets, even as it added more daily users than expected.
The company’s global average revenue per user, or ARPU, came in at $2.87, missing analyst expectations of $2.90, according to financial data firm StreetAccount. The ARPU figure, a key indicator of a social media company’s ad revenue per user, was particularly scrutinized after competitors like Reddit recently surpassed their own ARPU estimates.
Snap’s revenue for the quarter was $1.34 billion, just below the $1.35 billion anticipated by analysts polled by LSEG. While the company recorded a net loss of $262.6 million, an increase from a $248.6 million loss in the same quarter last year, its global daily active users grew to 469 million, topping the expected 467 million.
CEO Evan Spiegel attributed the disappointing results to a botched update to its ad platform, the timing of Ramadan and the “effects of the de minimis changes” related to trade policies. Spiegel said the company has since reverted the ad platform changes, which had caused some campaigns to clear at “substantially reduced prices.”
“Now that we have reverted this change, our advertising revenue growth has improved as advertisers adjust their bid strategies to achieve their objectives,” Spiegel wrote in a letter to investors.
Looking ahead, Snap provided a rosier third-quarter outlook, forecasting revenue between $1.475 billion and $1.505 billion, which is above StreetAccount’s projection of $1.475 billion. The company also anticipates a higher adjusted EBITDA and continued growth in its daily active users.
Snapchat’s premium subscription service, Snapchat+, saw a significant boost, approaching 16 million subscribers. Spiegel noted the service’s 42% year-over-year increase makes it the “largest driver” of the company’s “Other Revenue” category, which grew 64% to $171 million.
Spiegel also announced an internal reorganization, distributing engineering teams to support different business functions and naming a new reporting structure for key executives. He also revealed that Eric Young, senior vice president of engineering, would be leaving the company.