What's going on?
Snap reported worse-than-expected quarterly results late last week.
What does this mean?
Snap lowered expectations back in May by warning it would miss both its initial revenue and profit growth estimates for the quarter. Just as well: the company’s results were even worse than analysts’ revised expectations. That’s mainly down to Snap’s flailing online advertising business: demand waned as customers cut their marketing budgets, and fierce competition – we’re looking at you, TikTok – stole those that were spending. On top of that, Apple’s iOS privacy updates have been making it harder to roll out targeted campaigns. Snap’s overall revenue grew just 13% in the end, short of the 16% analysts were expecting. Things aren’t looking up, either: the company said revenue has yet to grow this quarter from the same time last year, and that it’ll continue to slow down any hiring in a bid to cut costs.
Why should I care?
For markets: Misery, meet company.
Not even Snap’s new share buyback program could appease investors: they still sent the company’s shares down 25% after the update, meaning its stock has lost about 75% of its value this year. But it didn’t stop there: investors also sent Meta and Alphabet’s stock down 5% and 3% respectively after Snap’s update, likely because they’re wary the same trend will show up in other ad-reliant companies when they report results in the coming week.
Zooming out: When in doubt, sue.
Those investors might be onto something: Twitter reported disappointing quarterly results across revenue, profit, and user growth on Friday. The company chalked some of that up to lagging advertising spending, but also blamed Elon Musk’s fluctuating interest in buying Twitter – and the resulting uncertainty – for the slump (tweet this). No wonder Twitter wants to put an end to that: the social media giant’s set to take Musk to trial this October over his attempt to pull out of the deal.