Shares of Snap (SNAP), the parent company of social media platform Snapchat, have fallen 17% after it issued earnings guidance for the current quarter that missed Wall Street expectations.
The lowered guidance comes as Snap reported second-quarter earnings that beat the consensus forecasts of analysts.
For the quarter ended June 30, Snap announced a loss per share $0.02 U.S., which was better than the $0.04 U.S. a share loss that analysts had penciled in for the company, according to Refinitiv data.
Revenue in the quarter totalled $1.07 billion U.S. versus $1.05 billion U.S. that was expected among analysts who track the company’s progress.
Snap also reported Global Daily Active Users (DAUs) of 397 million compared to 394.9 million that was expected, and average revenue per user of $2.69 U.S. versus $2.68 U.S. that was forecast.
However, Snap’s overall sales in Q2 fell 4%, marking the second consecutive quarter of declining year-over-year revenue at the company.
But the real problem for Snap seems to have been the forward guidance it provided. The company said that for the current third quarter, it expects its daily active users to reach between 405 million and 406 million.
The company also said that it expects between $1.07 billion U.S. and $1.13 billion U.S. in total sales for Q3, which implies negative 5% to flat year-over-year growth.
Analysts were projecting Snap to report Q3 sales of $1.13 billion U.S. along with 406 million daily active users.
Snap has undertaken a major cost-cutting initiative over the last year, laying off 20% of its workforce. The company reported that its Q2 operating expenses declined 8% year-over-year to $615 million U.S.
Snap also announced a Snapchat+ subscription plan in June 2022, promoting it as a way for users to access exclusive features and updates for a monthly fee of $3.99 U.S.
Adoption of the Snapchat+ feature has been slow among consumers, according to the company.
Prior to today (July 26), Snap’s stock had risen 30% in the last 12 months to trade at $12.51 U.S. per share.
