Snap posted a $422 million loss and “substantially” reduced rate of hiring in its Q2 earnings report released Thursday, prompting its share price to fall 26% in after-hours trading.
Big losses largely prompted the stock crash: The $422 million loss is 17% greater than Q1’s $360 million loss and nearly double the $152 million loss in the second quarter of 2021.
But the numbers weren’t all bad. Snap earned $1.11 billion in revenue, slightly higher than the $1.06 billion it posted in the first quarter but slightly lower than Wall Street’s $1.14 billion estimate.
Snap’s user base also grew 4.5%, with 347 million daily active users, up from Q1’s 332 million and above Wall Street’s expected 343 million.
Snap attributed the growing losses to decreased demand fueled by a downturn in advertising revenue and the broader market ills of inflation and rising interest rates.
In an earnings call on Thursday afternoon, Derek Andersen, chief financial officer of Snap, emphasized a need to cut operating expenses—which will involve a “significant pause” in growing the company’s headcount.
Revenue-wise, the third quarter is starting off fairly flat, according to the investor letter, but executives on the earnings call said Snap is focused on diversifying its revenue streams and investing in its AR features, which Andersen described as Snap’s “longest-term, most promising opportunity.”
“The second quarter of 2022 proved more challenging than we expected,” reads Snap’s second-quarter investor letter. “Our financial results for Q2 do not reflect the scale of our ambition. We are not satisfied with the results we are delivering, regardless of the current headwinds.”
Snap launched a web version of its social media arm, Snapchat, earlier this week. The company is also in the early stages of incorporating NFTs onto the platform, according to a report last week from the Financial Times. In Snap’s second-quarter investor letter and on its earnings call, company executives stressed that predicting what the coming months might look like is “incredibly challenging,” and so Snap “does not intend to provide financial guidance for Q3.” Still, the company is looking long-term: According to the investor letter, cofounders Spiegel and Bobby Murphy, CEO and CTO, respectively, are staying in their roles until at least 2027.