Add Snap to the list of tech stocks utterly slammed in 2022.
Following a period of uneasy telegraphing, Snap ripped the bandaid off in a quarterly report Thursday revealing its weakest ever quarterly sales growth in its six years as a public company. The brutal blow to the company’s primary business reflects a larger downturn in digital advertising and could potentially pressure Snap to rein back its investment in less financially certain augmented reality pursuits.
The company reported $1.11 billion in revenue for the quarter which fell short of the $1.14 billion analysts expected. Making matters worse, Snap recorded a net loss of $422 million compared to $152 million in the prior year. Snap still managed to record decent daily active users growth but admitted Thursday’s results failed to meet the company’s expectations.
“While the continued growth of our community increases the long-term opportunity for our business, our financial results for Q2 do not reflect the scale of our ambition,” Snap wrote in a letter to investors. “We are not satisfied with the results we are delivering, regardless of the current headwinds.”
Though Snap didn’t mention Apple by name, the company said recent app store privacy changes (like Apple’s App Tracking Transparency feature) were partly to blame for dwindling advertising revenues.
“Over the past year, a series of significant headwinds have emerged that have disrupted this momentum,” the company wrote. “Platform policy changes have upended more than a decade of advertising industry standards, and macroeconomic challenges have disrupted many of the industry segments that have been most critical to the growing demand for our advertising solution.”
Snap’s stock price plummeted in reaction to the news, dipping more than 25%. Overall, CNBC notes Snap’s stock has lost almost two-thirds of its value in 2022. Snap said it plans to “substantially” reduce its rate of hiring moving forward in light of the troubling figures.
Snap’s setback mirrors a broader 2022 downturn plaguing the tech industry specifically, and digital advertising in particular. Meta, once seen as a never-ending ad growth machine, lost $250 billion worth of value in a single day earlier this year following poor advertising growth numbers. Like Snap, Meta blamed Apple’s ATT feature for part of the decline and said the new tool could cost them $10 billion in revenue this year. Google, on the other hand, still managed to record 22% growth in online ad sales in Q2, which alone isn’t bad but it’s still a far cry from the 69% advertising revenues growth reported in Q2 2021. Google’s starting to tighten its belt and announced a two-week hiring freeze this week amid economic uncertainty. GroupM, a media investment company, predicts ad revenue growth industry-wide of just 8.4% in 2022, down significantly from 24.3% growth last year.
Snap’s slumping advertising performance could have the side effect of pumping the brakes on its ambitious and expensive augmented reality glasses pursuits. The company isn’t shy about wanting to spend big on advancing AR tech, but slumping revenue from its main cash cow could force less financially certain future tech to the back burner.