Snap Inc stock fell nearly 30% in premarket trading following its report of single-digit Q3 revenue growth and likely zero growth for the holiday season during Thursday’s Q3 earnings call.
The stock opened on Friday at $7.76, not far from its 52-week low of $7.51.
The news also sent other advertising-driven tech giants’ stock into decline, with Meta down about 4%, Alphabet down 2% and Pinterest down 8%.
Even Twitter, which has gained more than 20% since Elon Musk first announced his intention to acquire it, saw an 8% decline —although that was partly driven by a Bloomberg report that the federal government is mulling a security review of Musk’s holdings, possibly including the involvement of foreign investors in the Twitter deal.
Year to date, Snap is down about 77%. Prior to yesterday’s selloff, which added up to about $40 billion in losses, Meta was down about 60% and Pinterest is down between 30% and 60% for the year.
In total, digital ad platforms have lost about $1 trillion in value this year, according to Reuters.
The losses reflect advertising slowdowns caused by ad targeting challenges resulting from Apple’s iOS privacy opt-in policy, competition from TikTok, and more recently, advertising budget cutbacks in response to inflation and fears of recession. In challenging economic periods, some media buyers shift dollars away from Snap and other second-tier platforms, in favor of core platforms like Facebook.
Snap’s Q3 adjusted earnings per share (8 cents) exceeded expectations (-$0.01). But its revenue missed ($1.13 billion versus $1.14 billion expected), and its 6% revenue growth marked the first time growth has been in the single digits since it went public in 2017.
In addition, its net loss jumped by 400%, to $360 million, in part due to a $155 million charge resulting from a complete restructuring of its operations that included slashing 20% of its employees and dropping several businesses, including Snap Originals. Some analysts have expressed concerns that the staff cuts could hamper the company’s performance.
Global daily active users (DAUs) rose 19% year-over-year, to 363 million, but missed expectations (358.2 million). Average revenue per user declined 11% to $3.11.
“Total time spent watching content in the United States decreased 5% year-over-year as the diminished depth of engagement with Friend Stories was not fully offset by the growth in viewership and growth in time spent with Discover and Spotlight in the U.S.,” Snap said in its letter to investors.
For a second consecutive quarter, Snap also said it would not provide a formal guidance for the current quarter. But executives did indicate that they are not expecting any growth in Q4. The fourth quarter “has historically been relatively more dependent on brand-oriented advertising revenue,” which declined in Q3, the company noted.
“Our revenue growth continued to decelerate in Q3 and continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition,” Snap wrote. “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital.”