Snap user growth, but Q2 revenue and guidance fell short of expectations, plunging more than 20% after hours | Financial report insights

Due to third-quarter performance guidance falling below analysts' expectations, social media stock Snap plummeted more than 20% after hours on Thursday.

On Thursday, August 1, Snap announced its second-quarter financial results for 2024.

1) Key Financial Data

Revenue: Q2 revenue increased by 16% year-on-year to $1.24 billion, slightly below the expected $1.25 billion.

Earnings Per Share: Adjusted EPS for Q2 was $0.02, in line with LSEG's forecast of $0.02.

Adjusted EBITDA: Q2 adjusted EBITDA was $5.5 million, higher than analysts' expected $4.11 million.

Global Daily Active Users: 432 million DAUs in Q2, exceeding analysts' expectation of 431.17 million.

Global Average Revenue Per User: $2.86, lower than the expected $2.91.

2) Outlook

Revenue: Expected revenue growth for the third quarter is 12%-16% to be between $1.335 billion and $1.375 billion, with a midpoint of $1.355 billion slightly below analysts' expected $1.36 billion.

Profit: Adjusted earnings are expected to be between $70 million and $100 million, falling short of the average analyst expectation of $110 million.

After the financial report was released, Snap's stock price plummeted more than 20% after hours, marking a cumulative decline of 24.34% this year.

Weak consumer environment leads to cautious spending by advertisers, dragging down Snap's revenue below expectations

In a letter to investors, Snap revealed that the company is increasing investments in infrastructure, employees, and marketing to achieve long-term growth. However, growing legal and regulatory requirements are adding additional cost pressures to the company. Despite this, Snap achieved a 16% year-on-year revenue growth in the second quarter, albeit slightly below expectations. The company noted that soft demand for advertising from certain non-essential consumer brands was one factor affecting revenue.

In terms of user growth, Snap's monthly active users increased from 800 million in February to 850 million. CEO Evan Spiegel stated:

"Our community grew to over 850 million monthly active users in the second quarter, with over 11 million subscribers to Snapchat+. We continue to expand our advertising platform, with the number of active advertisers more than doubling compared to the same period last year."

Snap introduced the Snapchat+ subscription service for the first time in 2022, aiming to expand its business beyond online advertising. The company announced earlier this year that the service generated an annualized revenue of $249 million in 2023 In terms of the industry, Meta announced better-than-expected second-quarter results on Wednesday, with its main revenue source, online advertising, growing by 22% year-on-year to $39.07 billion. Thanks to revenue and profit both exceeding expectations and optimistic forecasts for Q3 revenue, Meta's stock price subsequently rose by about 5%.

In stark contrast to Meta's strong performance, Pinterest saw a significant drop in its stock price this week. The company's second-quarter financial report and third-quarter performance guidance fell short of analysts' expectations. Chief Financial Officer Julia Brau Donnelly mentioned during the earnings conference call that food and beverage advertisers are facing greater challenges in the market, affecting their advertising investment and effectiveness on Pinterest.

Alphabet's second-quarter financial report released last week showed an 11% growth in its Google advertising business, with revenue reaching $64.6 billion. However, YouTube's advertising sales were $8.66 billion, falling short of analysts' expected $8.93 billion