Why Snap Expects Its Revenue to Decline by as Much as 10 Percent

Snap reported on Tuesday that the firm swung to a net loss in Q4 2022 and the parent firm of popular app Snapchat expects revenue to fall by up to 10 percent in the current quarter. The company said that its business continued to be hurt by a weakening economy, increased competition from rivals and "platform policy changes".

Snap on Tuesday swung to a net loss in the fourth quarter and said revenue could decline in the current quarter by as much as 10 percent as it faces fierce competition from rivals like TikTok and weak advertising demand.

The owner of photo messaging app Snapchat is the first of the major digital advertising platforms to report quarterly results, which often provide an early signal for platforms like Facebook owner Meta and Alphabet‘s Google, which report results this week.

In a letter to investors, Snap said a weakening economy, increased competition from other social media platforms and “platform policy changes” continued to hurt its business.

Apple began rolling out privacy changes on iPhones in 2021 that have limited advertisers’ ability to collect data for targeted advertising.

“We expect the headwinds we have faced over the past year to persist throughout Q1,” the company said in a letter to investors.

Snap’s net loss was $288 million (roughly Rs. 2,350 crores) during the quarter, down from net income of $23 million (roughly Rs. 190 crores) the previous year. Revenue for the fourth quarter that ended December 31 was $1.3 billion (roughly Rs. 1,06,000 crore), flat from the prior-year quarter and in line with analyst expectations.

Snap will host an investor day on February 16 to detail its plan to move forward after announcing in August that it would lay off 20 percent of its staff and discontinue experimental projects like a drone camera to cut costs.

The tech sector has been hammered in recent months amid record-high inflation and expectations of a recession.

Shares of the Santa Monica, California-based company are down 65 percent over the past year.

Daily active users on Snapchat rose 17 percent year-over-year to 375 million, beating analyst expectations of 374 million, according to IBES data from Refinitiv.

In its letter to investors, the company said its internal forecast assumes a 2 percent to 10 percent revenue decline in the first quarter compared to a year ago, and said revenue is currently down 7 percent so far in the quarter.

Snap forecasts daily active users in the first quarter between 382 million and 384 million.

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