Summits Yellow

Snap’s shares drop 20 per cent after first financial results show slowing growth

Tim Maytom


Shares in Snap, the company behind social photography app Snapchat, have dropped 20 per cent in value in after-hours trading following the company’s first quarterly results since its initial public offering. The drop was largely due to disappointing growth figures.

Daily active users (DAUs) on the app rose just five per cent quarter-on-quarter and 36 per cent year-on-year, to 166m. This time last year, Snapchat was adding DAUs at 52 per cent year-on-year. The slowing growth was blamed on Facebook’s concerted efforts to mimic Snapchat’s unique features, with Instagram’s Stories feature outpacing Snapchat’s own and reaching 200m DAUs.

Snap’s net losses for the quarter soared from $104.6m (£80.9m) to $2.2bn, largely due to the costs of the IPO. Revenues for the quarter rose by an impressive 286 per cent but still fell short of forecasts by around $9m, and the company’s adjusted loss of $188.2m was higher than expected.

Average revenue per user rose 181 per cent year-on-year, but was actually down quarter-on-quarter by 14 per cent to $0.90. The company generated most of its revenues from advertising, but brought in $8.3m from elsewhere, largely driven by its Spectacles smartglasses. Despite this, only 5m Snaps have been created through the wearables to date, compared to the 3bn sent daily over the application as a whole.

During the earnings call, CEO Evan Spiegel, who some had speculated wouldn’t be present, said that Q1 had seen the company focused on “working on the quality of the Snapchat application”, especially on Android, where bugs had contributed to slowing user growth in Q4 2016. During Q1, 30 per cent of new users were on Android, compared to 20 per cent from the previous quarter.