Snap Inc on Thursday painted a grim picture of the effects of a weakening economy on social media and declined to make a forecast in “incredibly challenging” conditions, sending its shares down 25% and setting off a chain reaction of stocks among rivals.
The Snapchat owner said some advertisers continue to face supply-chain disruptions and labor shortages, and many others are contending with rising costs amid record inflation, which has led to cutbacks in spending on advertising.
The Santa Monica, California-based company said it will significantly slow hiring, invest in its advertising business and find new sources of revenue in order to grow at a faster pace.
Facebook owner Meta Platforms Inc , Google owner Alphabet Inc and other companies that sell online ads lost about $80 billion in combined stock market value on Thursday after the results by Snap, which was the first of the major tech firms to report second-quarter earnings. Twitter Inc will report results on Friday.
Investors are expecting the slowest-ever pace of growth for social media ad revenue this year, as rising inflation and other economic woes cause brands to slash their marketing budgets.
Snap’s revenue for the second quarter ended June 30 was $1.11 billion, missing analyst expectations of $1.14 billion, according to IBES data from Refinitiv. The figure grew 13% from the prior-year quarter.
