Snap, the maker of the messaging app Snapchat, said on Monday that it expected to miss its quarterly financial goals as it dealt with toughening economic conditions.
Evan Spiegel, Snap’s chief executive, said in an email to employees that the company was likely to miss its targets for revenue and adjusted profit in the second quarter. Snap would also slow its pace of hiring this year, though the company still expected to add around 500 employees, he said in the email, which was obtained by The New York Times.
“Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more,” Mr. Spiegel wrote.
The warning sent Snap’s stock price plummeting nearly 30 percent in after-hours trading, after closing at $22.47. Snap declined to comment further.
Snap’s announcement comes amid a slowdown for tech start-ups, as venture capital funding has fallen and young companies have been cutting costs and laying off employees. Some social media companies have also been hit by other factors, including changes to Apple’s privacy settings that have hurt their ability to do targeted advertising. Meta, the parent company of Facebook, recently instituted a temporary hiring freeze for some roles.
Still, tech giants including Microsoft, Apple and Google are continuing to spend big.
In April, Snap reported more than $1 billion in revenue for the first quarter, which fell narrowly short of Wall Street’s expectations. The company projected that revenue for the second quarter would increase by 20 to 25 percent from $982 million a year earlier.
“Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated,” Derek Andersen, Snap’s chief financial officer, wrote in a brief statement filed with the Securities and Exchange Commission.
Tom Forte, an analyst at D.A. Davidson, said digital advertising, which makes up much of Snap’s revenue, was often among the first cuts in periods of economic uncertainty.
“Given the growing list of challenges to the economy including inflation in food and fuel prices, we are not surprised that Snap’s 2Q22 sales are expected to fall short of its prior guidance,” Mr. Forte said.
Source: New York Times