Snap reported $1.11 billion in revenue during the second quarter after the company previously warned it would miss its revenue expectations for the quarter.
The revenue number marks a 13 percent increase year-over-year, coming in below its previous guidance of 20 percent to 25 percent. Daily active users increased 18 percent year over year to reach 347 million.
The company did not provide third-quarter revenue or EBITDA guidance due to “uncertainties related to the operating environment.” Snap shares were falling 23 percent in after-hours trading Thursday.
“While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect our ambition,” Evan Spiegel, chief executive of Snap. “We are evolving our business and strategy to reaccelerate revenue growth, including innovating on our products, investing heavily in our direct response advertising business, and cultivating new sources of revenue to help diversify our topline growth.”
Part of this evolution will include “a substantially reduced rate of hiring” and also examining other operating expenses, while the company continues to invest in long-term sectors, with a particular focus on augmented reality.
“We are not satisfied with the results we are delivering, regardless of the current headwinds,” Spiegel said in a letter to investors.
Spiegel and his Snap co-founder Bobby Murphy signed agreements to serve as chief technology officer and chief executive officer through at least Jan. 1, 2027. The pair will each make $1 per year and will not receive equity compensation. The board of directors has agreed to issue a stock split if the Class A share price reaches $40 in the next 10 years, which would allow the co-founders to donate or sell additional Class A shares.
Snap also announced a $500 million stock buyback program, which the company said is intended to “offset” dilution related to the company issuing stock to employees “as part of the overall compensation program designed to foster an ownership culture.”
In May, Snap said in an SEC filing that because “the macroeconomic environment has deteriorated further and faster than anticipated,” the company would not meet the low end of its revenue and adjusted EBITDA guidance. That same month, Spiegel informed staff the company would be slowing down its hiring for the remainder of the year, with a limit set at 500 new hires compared to the 2,000 new employees brought on in the last 12 months. The top executive attributed the negative impact to Snap’s business on rising inflation, supply chain shortages, platform policy changes and the war in Ukraine, according to a memo reported on by The Verge.
In the letter to investors, Snap also spoke to the impact of increased competition on advertising, as platforms compete for an overall lower ad pool across the industry. Snap saw a 25 percentage point deceleration in revenue growth quarter-over-quarter and said revenue decelerated as the quarter progressed.
“We’re seeing these various headwinds put pressure on the earnings of a wide variety of companies, and this is directly impacting the demand on advertising,” said Derek Andersen, the company’s chief financial officer.
Snap may be particularly impacted, according to Andersen, due to the ease with which advertisers can scale or decrease their campaigns on the platform. To help boost ad revenue, Snap said it will improve its ad measurement tools and continue to invest in ranking and personalization.
As the tech giants face a looming recession and plummeting stock prices — shares of Snap have dropped more than 50 percent in the last six months — Snap is also beginning to experiment with subscriptions as an additive to its advertising-driven business. In late June, the company launched Snapchat+, a $3.99 a month subscription offering that gives users access to new features. Earlier this week, ahead of earnings, the company also rolled out a web version of its Snapchat app for subscribers that allows users to send messages and make video calls on their computers.