Snapchat shares plunge on weak forecast for third quarter

Snap also issued its financial guidance for the present quarter on the assumption that its daily active users would reach around 406 million. Snap said it expected its total sales to be between $1.07 billion and $1.13 billion for the third quarter, which it said implied "negative 5 percent to flat year-over-year growth", CNBC reported.

Analysts were estimating Snap to report $1.13 billion worth of third-quarter sales with 406 million daily active users in the same period.

Snap's weak outlook "highlights concerns that advertising money is not going to the smaller social media networks amid the constrained economic environment," said Jesse Cohen, senior analyst at Investing.com, news agency Reuters reported.

Earlier this year, the company updated its machine learning model to serve more relevant promotions to users, which Snap said in the short term caused a small number of its largest advertisers to see fewer "actions," such as users tapping on ads, than they did previously

Advertisers are beginning to see results from the changes, which led to a more than 30% increase in "purchase-related conversions" compared to the first quarter, Snap told investors.

The improvements also helped Snap grow the total number of advertisers on its platform, though it is not yet enough to make up for the lower ad demand from some larger brands, it added.

During a conference call with analysts, Snap's chief financial officer Derek Andersen said the consumer packaged goods, restaurants and travel industries were strong, but advertisers in other sectors continued to face economic challenges.