Shares in Snap Inc. plummeted more than 20% Thursday after the camera app reported its slowest-ever quarter for revenue growth since going public in 2017.
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In a letter to investors, Snap said its business "continued to face significant headwinds in the third quarter" but that it remains bullish on its strategy thanks to previously-announcedLooking ahead to the fourth quarter, which is typically Snap's most lucrative thanks to holiday season ad sales, the company said it's "highly likely" that year-over-year revenue growth will decelerate.
So far in Q4, Snap says it's seeing revenue growth of approximately 9% year-over-year, but because its fourth quarters are historically weighted much more heavily towards the back half of the quarter, it's making the assumption internally that year-over-year revenue growth will be roughly flat next quarter.
By comparison, last year the company saw a 42% year-over-year revenue growth it saw during the fourth quarter compared to 2020.: Snap says it saw a pullback in the third quarter on spending in brand ads, or ads that tout a company's reputation rather than trying to sell a product directly. Snap's fourth quarter is typically more dependent on brand ads than other quarters.
When the economy starts to show signs of a slowdown, marketing spend, and particularly brand marketing spend, is one of the first expenses that companies tend to cut.The company beat analyst expectations on earnings per share, but missed expectations on revenue growth.Still, it managed to grow its user base well ahead of Wall Street expectations. The increased its daily active user 19% year-over-year 363 million.
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