Snap Inc 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.
Shares of Snap fell 13 percent to $10.30 in trading after the bell. Meta shares fell two percent and Alphabet dropped one percent. Pinterest dropped five percent.
The owner of the 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 Platforms Inc 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.
HEADWINDS PERSIST
"We expect the headwinds we have faced over the past year to persist throughout Q1," the company said in a letter to investors.
Revenue for the fourth quarter that ended December 31 was $1.3 billion, flat from the prior year and in line with analyst expectations.
Snap's net loss was $288 million during the quarter, versus a net income of $23 million the previous year. It reported adjusted earnings per share of 14 cents, beating Wall Street estimates of 11 cents.
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.
It said it now has more than two million subscribers to its premium product Snapchat+, which Snap launched last year in an effort to develop a new revenue source.
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 two percent to 10 percent revenue decline in the first quarter compared to a year ago, and said revenue is currently down seven percent so far in the quarter.
Snap forecast daily active users in the first quarter between 382 million and 384 million.
