Snap, the parent company of Snapchat, fell just short of Wall Street revenue expectations for the third quarter — which were already lowered — reporting sales growth of 6%.
The company posted sales of $1.128 billion for Q3 and adjusted net income of 8 cents/share. Net loss was $360 million, including restructuring charges of $155 million, compared with a net loss of $72 million in the prior year. In late August, Snap laid off 20% of its workforce, nearly 1,300 employees, and announced the shutdown of several initiatives, including ending Snapchat original series.
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Snap stock dropped more than 22% in after-hours trading on the top-line miss.
Wall Street analysts on average expected $1.14 billion in revenue and an adjusted net loss of 1 cent/share, per financial data provider Refinitiv. The company previously disclosed revenue in Q3 through Aug. 29 was up about 8% year-over-year, well below prior expectations, but otherwise had not released guidance for the quarter. Snap did not provide guidance for Q4 “given uncertainties related to the operating environment.”
Snapchat average daily active users in Q3 hit 363 million, up 17 million from 347 million in the prior quarter and up 19% year over year. In addition, the company said Snapchat+, its subscription service for exclusive, experimental and prerelease features, had more than 1.5 million paying subscribers in Q3 and is now offered in over 170 countries.
Snap did not provide guidance for Q4 “given uncertainties related to the operating environment.”
“This quarter we took action to further focus our business on our three strategic priorities: growing our community and deepening their engagement with our products, reaccelerating and diversifying our revenue growth, and investing in augmented reality,” Snap CEO Evan Spiegel said in prepared remarks. Snapchat’s DAU growth “continues to expand our long-term opportunity as we navigate this volatile macroeconomic environment.”
Snap has been dealing with the exit of two top ad execs — chief business officer Jeremi Gorman and VP of sales Peter Naylor — who joined Netflix this summer to lead its ad business. In August, Snap named Jerry Hunter, previously SVP of engineering, to the position of COO.
With Snap largely exiting the original content business, the company said it’s focusing on content from media partners and creators. Over the years, Snap had funded dozens of original series for the Discover section of the Snapchat app, including shows featuring Charli and Dixie D’Amelio, Megan Thee Stallion, Stephen Curry, Ryan Reynolds, Simone Biles, Will Smith and Addison Rae.
Snap previously said its layoffs and cost-cutting steps would save $500 million in cash expenses on an annualized basis, including $50 million on Snapchat originals, relative to Q2 2022, according to the company.
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