Snap's Second-Quarter Revenue Falls Short of Expectations, Stock Price Plummets 15%

Snap CEO Evan Spiegel

Snap announced its second-quarter earnings on Tuesday, revealing that the company's global average revenue per user (ARPU) fell short of expectations, causing its stock price to plummet 15%.

The following are the company's performance metrics compared with Wall Street expectations:

Earnings per share: Loss of $0.16. This data cannot be directly compared with analyst expectations. Revenue: $1.34 billion, while LSEG expected $1.35 billion. Global daily active users: 469 million, while StreetAccount expected 467 million. ARPU: $2.87, while StreetAccount expected $2.90.

ARPU reflects the company's average revenue per user from advertising. This result was significantly lower than expected, as some of Snap's social media and online ad peers (such as Reddit) reported higher ARPU in their second-quarter earnings reports.

Snap stated that its second-quarter sales revenue grew 9% year-over-year, but net loss reached $2.626 billion. Last year's same period, the company's net loss was $2.486 billion.

Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) for the second quarter was $41 million, lower than StreetAccount's expected $53 million.

Snap forecast that its third-quarter revenue would be between $14.75 billion and $15.05 billion, higher than Wall Street expectations of $14.75 billion.

The company also predicted that its adjusted EBITDA for the third quarter would be between $110 million and $135 million, with a value of $122.5 million higher than StreetAccount's expected $116 million.

Snap stated that its global daily active users total would reach 476 million in the third quarter, close to StreetAccount's expected 475 million.

Snap CEO Evan Spiegel wrote in a letter to investors that the company's Snapchat+ subscription service had approximately 16 million subscribers, up 42% year-over-year. Spiegel stated that the subscription service is "the largest driver" of the company's "other income" category, with revenue growing 64% year-over-year to $1.71 billion.

Spiegel mentioned in his letter that Snap's second-quarter adjusted operating expenses grew 10%, reaching $6.54 billion.

Spiegel stated in the letter that the company would "allocate" engineering teams to "directly support" business functions, with core app teams reporting to technical lead Bobbie Murphy and monetization engineering teams reporting to business leader Ajit Mohan.

"Our chief information officer and chief information security officer will report to me and lead enterprise-level foundation architecture and platform completeness work," Spiegel said in the letter. "This new distributed structure will enable our teams to take on more responsibility, driving innovation for our community and advertising partners."

Spiegel stated in the letter that Eric Yeo, Snap's senior vice president of engineering, would leave the company "to pursue new opportunities" as he had since joined from Google in 2023.

Last week, Amazon announced its second-quarter earnings report, with online advertising revenue growing 23% year-over-year to $156.9 billion; while Reddit reported a 78% increase in revenue year-over-year to $5 billion.

Alphabet announced its second-quarter earnings report on July 23, with revenue and profits exceeding expectations. Meta announced on July 30 that its sales revenue grew 22%, reaching $475.2 billion.

Pinterest is expected to announce its financial performance on Thursday.