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Snap Shows Slower User Growth in Q2; Loss Widens to $326 Million

“At the onset of widespread shelter in place orders... we observed an increase in daily active users... This initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”

(Reuters) – Snap Inc on Tuesday said an initial lift in user growth at the start of coronavirus-led lockdowns dissipated faster than it expected, though the company beat expectations for quarterly revenue as advertisers turned to the app to reach younger users.

Shares of Snap were down 11% to $21.98 in after-hours trading immediately on the announcement before recovering some of the losses. The stock was down 5.7% to $23.36 at 5:15pm ET.

The Snapchat owner said daily active users (DAUs), a widely watched metric by investors and advertisers, rose 17% to 238 million in the second quarter ended June 30. Analysts were expecting DAUs of 238.44 million, according to IBES data from Refinitiv.

Snap has focused on helping advertisers increase sales directly from Snap ads, which contributed to the company’s revenue growth at a time when many brands have been cutting marketing budgets due to the pandemic.

The company has also positioned itself as a safe platform for brands to advertise on, as more than 1,000 companies have paused ads on larger rival Facebook Inc due to concerns about hate speech.

“The growing focus on brand safety and privacy across the entire industry places us in a unique position of strength as we have invested in these areas from the beginning of our business,” Snap Chief Executive Evan Spiegel said in prepared remarks.

Snap’s revenue, which it earns from selling advertising on the app, jumped about 17% to $454.2 million during the quarter, above estimates of $440.8 million.

The company’s net loss widened to about $326 million, or 23 cents per share, from $255.2 million, or 19 cents per share, a year earlier.

Chief Financial Officer Derek Andersen said third-quarter revenue growth was 32% through July 19, but he sees that moderating through the rest of the quarter to end at 20%.

The company also forecast DAUs to be between 242 million and 244 million in the current quarter.

Reporting by Akanksha Rana in Bengaluru and Sheila Dang in New York; Editing by Anil D’Silva.


Source: Reuters

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