Snap, still wrestling with an unpredictable advertising environment, reported first-quarter 2023 revenue that slightly undershot Wall Street expectations even as Snapchat’s user growth continued upward. The company said was not providing formal guidance for revenue or adjusted earnings for the second quarter of 2023.
The Snapchat parent company’s Q1 revenue was $989 million, a decline of 7%. It posted a net loss of $329 million (versus $360 million in the year-earlier quarter), translating to an adjusted net loss of 1 cent per share.
Shares of Snap dropped more than 19% in after-hours trading on the results. Wall Street analysts on average expected $1.01 billion in revenue and an adjusted loss of 1 cent per share, according to Refinitiv. Snap had previously told investors Q1 revenue could be down as much as 10% in the period.
Snapchat’s daily active user base rose about 8 million in the period, to an average of 383 million DAUs worldwide (up 15% from the year earlier), in line with expectations.
“We are working to accelerate our revenue growth and we are using this opportunity to make significant improvements to our advertising platform to help drive increased return on investment for our advertising partners,” Snap CEO and co-founder Evan Spiegel said in prepared remarks.
Advertising demand in Q1 was “disrupted by the changes we made to our ad platform to drive more click-through conversions, and as advertisers adapt their measurement solutions to these new objectives,” Snap said in its Q1 shareholder letter. “While these changes are disruptive in the short term, we are optimistic that our ad platform improvements are laying the foundation for future growth.”
But in the near term, Snap faces ongoing issues on the revenue front. In the second quarter, the company said, “we expect to face continued disruption in demand related to the advertising platform changes initiated early in Q1. While many of our most sophisticated advertisers have already begun to navigate these changes and resume growth in their spend with us, we anticipate that it will take time for some of our advertisers to fully recover and for our models to become better tuned to their new objectives.” It added that “we have some concern that advertisers who rely on backward-looking signals, such as lift studies, may have a delayed reaction to the changes made in early Q1 that could impact their advertising spending in Q2.”
Last week at the Snap Partner Summit, the company announced that Snapchat+, the subscription service that offers exclusive, experimental and prerelease features, reached more than 3 million paying subscribers in Q1. In addition, it launched My AI, an AI-powered chatbot to all Snapchat users (after it was previously restricted to Snapchat+ customers) designed to “surface the best of Snapchat to our community” including augmented-reality Lenses and recommendations from the Snap Mapt.
In August 2022, Snap laid off 20% of its workforce, nearly 1,300 employees and ceased several initiatives, including ending its funding of virtually all Snapchat original series.