Snap Stock Plummets 17.5% After Withholding Q2 Guidance
1min read Snap Inc., the social media company, experienced a significant drop in its stock price, falling by 17.5% in early trading on Wednesday. This decline came after the company chose not to provide guidance for its second-quarter performance, citing the uncertain macroeconomic environment. Snap's decision to withhold its performance outlook has raised concerns about the future of its advertising business, which is a critical component of its revenue.
In its earnings report, snap acknowledged that while revenue has been growing, the company faced challenges at the start of the quarter. The company stated that it believes it is prudent to adjust its investment levels in line with actual revenue growth. Snap specifically highlighted that the macroeconomic environment could suppress demand for advertising.
During the earnings call, Snap's Chief Financial Officer, Derek Andersen, revealed that some advertisers have already been impacted by changes to the "de minimis exemption" policy in the United States. This policy, which allows goods valued below $800 to enter the country tax-free, is set to end this Friday. The unpredictable tariff plans of Donald Trump have cast a shadow over this earnings season, with growing concerns about economic slowdown leading to expectations that companies may reduce their advertising spending.
Snap's revenue for the quarter grew by 14%, reaching $1.36 billion compared to $1.19 billion in the same period last year. The company's net loss narrowed by 54% to $140 million, or $0.08 per share, from $305 million, or $0.19 per share, a year ago. This reduction in loss was attributed to expenses related to cash severance payments, stock-based compensation, and other costs associated with the company's restructuring efforts for 2024.
Snap also reported continued growth in its user base. The number of daily active users increased from 453 million to 460 million. The company stated that its monthly active user base reached 900 million, up from 850 million in August of last year. However, the number of daily active users in North America decreased from 100 million to 99 million, though Snap expects this number to stabilize in the coming quarter.
Snap's decision not to provide guidance for the second quarter, coupled with the uncertain macroeconomic backdrop, has led many on Wall Street to anticipate pressure on the company's stock price. Analysts are likely to adjust their target prices for Snap's stock in response to these developments. The company's stock price decline has also affected other social media companies, with Pinterest, Reddit, and Meta experiencing similar drops in their stock prices.
Ask Aime: How will Snap's stock perform after missing Q2 guidance?
