- Snap missed revenue estimates and provided weak guidance in Q4, causing its stock to plunge 35% as investors questioned its ability to rebound from a challenging ad market.
- Snap’s revenue grew just 1% to $1.36 billion in Q4, below estimates of $1.38 billion. The company sees slower-than-expected ad growth rebounding in Q1.
- Analysts had mixed reactions to results. CEO Evan Spiegel believes investments in ads will drive revenue as advertisers diversify from Big Tech, but Snap must show sustained growth to regain confidence.
Snap stock plunged 35% on Wednesday following the company’s disappointing fourth-quarter earnings report. The social media firm missed revenue estimates and provided light guidance, sparking concerns over its ability to rebound from a challenging 2022 ad market.
Snap’s Q4 Results
In the fourth quarter, Snap generated $1.36 billion in revenue, slightly below the $1.38 billion expected by analysts. The company reported adjusted earnings per share of 8 cents, surpassing estimates of 6 cents. This marks Snap’s sixth consecutive quarter of single-digit growth or revenue declines.
For the first quarter, Snap forecasts that growth will pick up but not as quickly as analysts anticipated. The company cited the conflict in the Middle East as a 2 percentage point headwind to year-over-year growth in Q4.
Analysts expressed mixed reactions to Snap’s results. Morgan Stanley maintained an underweight rating given the slower-than-expected ad rebound. Barclays remained upbeat, calling the dip a buying opportunity. JPMorgan reiterated its underweight stance despite raising its price target.
In an interview, CEO Evan Spiegel said advertisers are looking to diversify away from Big Tech. He believes Snap’s investments in direct response ads will drive improved revenue as advertisers see better performance. Regarding recent layoffs, Spiegel says eliminating management layers will strengthen execution.
While Snap showed some positive momentum, its recovery continues to lag peers like Meta. The company needs to demonstrate it can sustain engagement growth and ad platform improvements to regain investor confidence after this latest earnings disappointment.