Snap (SNAP) reported its Q4 2022 earnings on Jan. 31, meeting analysts' expectations on revenue and user growth, but clocking a net loss and weak guidance for this year's Q1.
Here are the key numbers that emerged from Snap's report, as compared with Wall Street's estimates:
Q4 Revenue: $1.3 billion actual versus $1.31 billion expected
Adjusted Earnings Per Share (EPS): 14 cents versus 11 cents expected
Daily Active Users (DAUs): 375 million actual versus 374.7 million expected
The company also reported a net loss of $288 million, a stark comparison to the net income of $23 million that Snap reported this time last year. Further, Snap's Q1 2023 revenue guidance suggests a decline "between -10% to -2% year-over-year."
The Los Angeles-based company added that it expects to see its DAUs grow to between 382 million and 384 million in Q1 2023.
"We continue to face significant headwinds as we look to accelerate revenue growth, and we are making progress driving improved return on investment for advertisers and innovating to deepen the engagement of our community," CEO Evan Spiegel said in a statement.
Snap stock plunged in after-hours trading by about 13%.
Snap's 2022 ends with struggles that have dogged the company all yearToday's results mark the end of a long 2022 for Snap. Even in a rough year for Big Tech as a whole, Snap's 2022 stood out as uniquely tough. The company's shares tumbled around 80% throughout 2022, as it was rattled by slowed digital advertising, high inflation, and fast-growing competition from TikTok.
In August, Snap laid off 20% of its workforce, a move that affected 1,300 employees. The cuts were high-profile and included the axing its drone camera Pixy and Snap Originals, the exclusive short shows the company made with celebrities and influencers. Snap also shuffled its executive team around at the time.
So, we're now in the midst of a big 48 hours for social media earnings, as Meta (META) will be reporting tomorrow. The Facebook parent also had a rough 2022, in which the company's stock declined approximately 63% over the course of the year.
The Snapchat messaging application is seen on a phone screen August 3, 2017. REUTERS/Thomas WhiteHowever, it's notable that the stakes were especially high for Snap today, as Wall Street's grown increasingly skeptical of the company's prospects. To that end, Snap has seen a number of downgrades recently, including from Citizens-owned JMP Securities this month, from Outperform to Hold. The move was a long time coming, JMP analyst Andrew Boone said.
"While we acknowledge we are late with this downgrade, it reflects our preference for Meta (valuation) and Google (search has higher revenue visibility) over Snap while both have more mature short-form video products, which we expect to attract more user time over the next few years," Boone wrote in a note to clients.
Additionally, in December, Jefferies downgraded Snap from Buy to Hold, citing worries about how the company can stand up to the competition.
So, for now, those downgrades track. Snap remains in the throes of the advertising slowdown and, if the company's investor letter is anything to go by, they don't expect that to let up any time soon and are focused on coming up with solutions. Right now, advertising is Snap's business. In Q4 2021, Snap said in SEC filings that "for the years ended December 31, 2021, 2020, and 2019, advertising revenue accounted for approximately 99%, 99%, and 98% of total revenue, respectively."
Moving forward, look for Snap to tout and attempt to build efficiency in its advertising business.
"While we continued to face significant headwinds to our revenue growth in the quarter, we are optimistic about the improvements we are making to our direct response advertising platform and the early progress we have made improving return on advertising spend (ROAS) for our advertising partners," Snap's investor letter reads. "We believe that improving returns on advertising investments will enable us to continue to increase our share of wallet in this highly competitive environment."
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.
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