Snap’s bump in users during the coronavirus pandemic petered out ‘faster than anticipated’, while the company has reported an increase in losses for the last quarter.
Snap’s Q2 earnings pushed the company’s stock price down by more than 11pc in after-hours trading after showing that the bump in user numbers experienced during the coronavirus pandemic may have been short-lived.
The company posted net losses of $326m for the last quarter, which is a jump of nearly 28pc compared with this time last year ($255m). On a call with investors, Snap’s chief financial officer, Derek Andersen, said rising losses were due to the company’s long-term investments “to build on the momentum we have established with our community and our advertising partners”.
The company’s revenue increased by 17pc year-on-year in the last quarter to $454m, which was higher than the $439.1m predicted by Refinitiv. Europe was responsible for Snap’s biggest gains, with revenue rising by 30pc year-on-year. This was followed by North America (up 18pc) and the rest of the world (up 2pc).
Snap pointed to the challenges faced by advertisers during the pandemic, saying many paused spending on Snapchat throughout the quarter in order to replace it with “messaging that was more appropriate for the given moment”.
‘Initial lift dissipated faster than we anticipated’
Daily active users of Snapchat rose to 238m in the quarter, up 4pc from the 229m reported in April and up 17pc compared to this time last year. This was just under the figure of 238.48m predicted by analyst firm FactSet.
“At the onset of widespread shelter-in-place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate,” Andersen said.
“This initial lift dissipated faster than we anticipated as shelter-in-place conditions persisted.”
While revenue in Q3 is so far 32pc higher than this time last year, Snap predicts that growth will moderate through the rest of the quarter to level somewhere in the region of 20pc.
“Advertising demand in Q3 has historically been bolstered by factors that appear unlikely to materialise in the same way they have in prior years, including the back to school season, film release schedules and the operations of various sports leagues,” Andersen said.
“At this point in time, it is difficult to predict how these factors may impact advertising demand in the remainder of Q3.”