Snap isn’t having a good quarter. Following news this week that the company was laying off 10% of its workforce, amounting to hundreds of employees, the company’s stock tumbled after reporting a fourth-quarter profit loss. Shares of the Snapchat maker fell more than 30% in after-hours trading as investors reacted to Snap’s outsized revenue figures, tepid user growth and weak first-quarter guidance.
The company advertises on it Press release had grown daily active users by 10% year-over-year to 414 million, but that figure was only higher than 406 million the previous quarter. And it failed to significantly increase users in a quarter that is often the biggest of the year for app developers, as people have more downtime to fiddle with their smartphones during the holidays and download new apps. While Snap still appeals to younger users — a recent study found it was the second most popular communication app for kids, behind WhatsApp, and the most popular in terms of time spent — it has failed to scale of Meta, as it doesn’t appeal to adults like competitors like Facebook, Instagram and TikTok. And as lawmakers prepare to crack down on apps that target kids, Snap’s free-for-all days may be numbered.
Earlier this week, reports of widespread layoffs at Snap appeared to be telegraphed on news that the company was not expecting a good quarter, unlike Meta, which not only beat Wall Street’s expectations in the fourth quarter, but also paid its her expectations. first quarter dividend.
Instead, Snap posted revenue of $1.36 billion, below expectations for $1.38 billion. However, it beat earnings per share to 8 cents versus 6 cents as expected.
Its first-quarter outlook also fell short of what investors wanted to see, forecasting 420 million daily active users — another small increase, though largely in line with forecasts — and revenue of $1.095 billion to $1.135 billion, or 11 increase from % to 15%. Investors were looking for faster growth.
The company has struggled to expand beyond its core app, with its hardware projects like Snap Spectacles and the Pixy drone largely failing to gain traction. The latter was discontinued and even just recalled as a fire hazard. Meanwhile, Snap’s efforts to expand into the enterprise market haven’t fared as well, with Snap shutting down its ARES (Enterprise Augmented Reality Service) division after less than a year.
Now AR looks like a passing fad as Snap’s once-intelligent AR filters are quickly being replaced by more advanced AI filters, with consumer adoption of the latter most often on TikTok. Snap is attempting to move into this area with investments in its Lens Studio, used by creators of AR lenses, which now offers AI capabilities. But the AI features are still in beta. It also plays around with AI-powered Snap enhancements and AI images from a text message, but it has plenty of competition here. Meanwhile, Snap’s efforts to offer its own AI chatbot have been hit or miss, with the mere presence of the bot angering some users at first, then delivering impressive results.
However, the company is managing to grow its paid subscription product, Snapchat+, which now has 7 million subscribers as of the fourth quarter, it said. The company also revealed for the first time that the subscription has an annual revenue rate of $249 million in 2023, according to its investor letter.
More to come.
