Snap Inc. reported user growth that beat analysts’ estimates, sending shares higher in the secondary market.
The Snapchat app, popular with young people for sending disappearing messages and augmenting videos with special effects, attracted 332 million daily active users, up 18% from the same period last year, compared with an estimate of 330. .5 million, and growth occurred mainly abroad. That contrasts with its biggest competitor, Meta Platforms Inc., where growth has stalled.
“Among peers, it’s still healthy,” said Mandeep Singh, an analyst at Bloomberg Intelligence. The shares gained as much as 12% in after-hours trading.
Still, the company faces some short-term headwinds in the quarter. Snap forecast sales that missed analyst estimates and said the war in Ukraine will continue to put pressure on its performance. First-quarter sales rose 38% to $1.06 billion, the company said Thursday. That narrowly missed analyst expectations of 1.07 billion.
Looking ahead, the company forecast revenue growth of 20% and 25% for its second quarter. Analysts forecast sales growth of 28%.
“While we are pleased with our progress given the macroeconomic environment, we also recognize that we have a lot of work to do to realize our long-term opportunity,” CEO Evan Spiegel said in prepared remarks.
The company also posted a $360 million net loss, due in part to an investment loss, after posting its first profitable quarter late last year.
Derek Andersen, Snap’s chief financial officer, told analysts in prepared remarks that revenue growth for the quarter initially exceeded the company’s expectations, until a large number of advertisers suspended their campaigns following the Russian invasion of Ukraine. Most campaigns resumed within 10 days, he said. Andersen said that he believed the war in Ukraine would continue to strain marketing budgets.
But other problems have also plagued the Santa Monica, California-based social network, whose shares are down 50% in the last twelve months. New rules from Apple Inc. that require all apps to get the smartphone user’s permission to be tracked online have made it harder for advertisers to measure and manage their ad campaigns.
Then there’s the continued rise of short-form video service TikTok, with 2.91 billion monthly active users, owned by China’s ByteDance Ltd., which has sapped the time and attention of its core demographic of young teens. Snap’s competing video services, Discover and Spotlight, also include short videos from users and advertisers.
Snap is the first major ad-supported social media company to report first-quarter earnings. Similar factors could show up in reports from Meta Platforms Inc., Pinterest Inc, Twitter Inc. and Alphabet Inc., all reporting as early as next week. Pinterest and Meta fell after the results of Snap. Andersen also noted that supply chain disruptions and rising interest rates weighed on Snap’s results.
Next week at its annual Partner Summit, Snap will unveil the latest advances in augmented reality, which is also an area of interest for one of its main rivals, Meta. Snap said that more than 250 million users interacted every day with augmented reality tools, such as filters they can place over camera images, adding things like key historical figures at culturally important landmarks.
“We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate,” Spiegel told investors. “What started as an app for visual communication has grown into a leading augmented reality platform where creators create unique and innovative AR experiences.”
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