Snap, the maker of messaging app Snapchat, said on Monday it expects to miss quarterly financial targets as it grapples with tightening economic conditions.
Snap CEO Evan Spiegel said in an email to employees that the company could miss its second-quarter revenue and adjusted earnings targets. Snap will also slow hiring this year, although the company still expects to hire about 500 new employees, he said in emails obtained by The New York Times.
“Like many companies, we continue to face inflation and rising interest rates, supply chain shortages and labor disruptions, changes in platform policy, the effects of the war in Ukraine, and more,” Mr. Spiegel wrote.
The warning sent Snap’s stock down nearly 30% in after-hours trading after closing at $22.47. Snap declined to comment further.
Snap’s announcement comes amid a slowdown in tech startups as venture capital funding dwindles, startups cut costs and lay off workers. Some social media companies were also affected by other factors, including changes to Apple’s privacy settings, which affected their ability to serve targeted ads. Facebook’s parent company, Meta, recently imposed a temporary hiring freeze on some positions.
Still, tech giants like Microsoft, Apple and Google are spending heavily.
In April, Snap reported more than $1 billion in first-quarter revenue, slightly below Wall Street expectations. The company forecasts second-quarter revenue to rise 20% to 25% from $982 million a year earlier.
“The macroeconomic environment has continued to deteriorate at a faster-than-expected rate since our guidance on April 21, 2022,” Snap’s chief financial officer Derek Andersen wrote in a brief statement to the SEC .
D.A. analyst Tom Forte Davidson said digital advertising, which accounts for the majority of Snap’s revenue, is often one of the first businesses to cut back in times of economic uncertainty.
“Given the growing challenges facing the economy, including food and fuel price inflation, we are not surprised that Snap’s 2Q22 sales are expected to lag earlier forecasts,” Mr Forte said.