Snap, the maker of messaging app Snapchat, said Monday it expects to miss its quarterly financial targets due to deteriorating economic conditions.
Snap CEO Evan Spiegel said in an email to employees that the company would likely miss its revenue and adjusted profit targets in the second quarter. Snap was also set to slow its hiring pace this year, though the company still expected to add about 500 employees, he said in the email, obtained by The New York Times.
“Like many companies, we are still dealing with rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine and more,” wrote Mr Spiegel.
The warning sent Snap’s stock price plummet in after-hours trading by nearly 30 percent, 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 plummeted and young companies have cut costs and laid off employees. Some social media companies have also been hit by other factors, including changes to Apple’s privacy settings that have affected their ability to create targeted ads. Facebook’s parent company Meta recently put a temporary hiring freeze on some positions.
Still, tech giants, including Microsoft, Apple, and Google, continue to spend a lot of money.
In April, Snap reported first-quarter revenue of more than $1 billion, which fell just short of Wall Street’s expectations. The company forecast second-quarter revenue would increase 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 expected,” Derek Andersen, Snap’s chief financial officer, wrote in a brief statement filed with the Securities and Exchange Commission.
Tom Forte, an analyst at DA Davidson, said digital advertising, which makes up a large part of Snap’s revenue, was often one of the first cuts during periods of economic uncertainty.
“Given the growing list of challenges facing the economy, including inflation in food and fuel prices, we are not surprised that Snap’s Q2 22 sales are not expected to meet earlier expectations,” said Mr. Forte.
