Snap Q3 2022 Earnings Report Recap

SNAP beat on EPS but saw shares plummet

By
Nathan Reiff
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Nathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016.
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Published October 21, 2022

Key Takeaways

  • Shares of Snap fell more than 28% following its financial report.
  • Revenue growth slowed even as daily active users beat analyst estimates.
  • Advertising sputters, reducing company's main source of revenue.
  • Citing operating environment uncertainties, Snap didn't provide guidance for the last quarter of the year.
Snap Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted Earnings Per Share Beat  $0.08 -$0.02
Revenue  Match $1.1B $1.1B
Average Daily Active Users  Beat 363.0M 359.2M

Source: Predictions based on analysts' consensus from Visible Alpha

Snap (SNAP) Financial Results: Analysis

Shares of Snap Inc. (SNAP), the owner of Snapchat, tumbled after the company reported its smallest revenue increase since it first sold shares to the public in 2017 on a slump in advertising.

Snap dropped almost 30% after saying third-quarter revenue was flat at $1.1 billion, in line with expectations, and predicting a "challenging" business environment in coming months. While it earned 8 cents a share, compared with expectations of a 2 cent loss, its profit was still down by more than half from a year ago. The company spent $155 million on restructuring in the quarter as it fired a fifth of its workers.

A looming recession, global instability, and inflation all threaten advertising dollars, a significant source of revenue. Snap's ad spending has also been hit by competition from TikTok for its younger users. Snap announced that engagement among users 35 years and older was up 40%, possibly signaling a shift in its demographic approach.

SNAP Daily Active Users

The company's average daily active users (DAUs) outperformed analyst predictions by nearly 4 million, climbing by over 18% to 363 million. DAUs are defined as any registered Snapchat user who opens the Snapchat app at least once during a 24-hour period, providing a snapshot of the size of its user base. The bigger that is, the more attractive the platform is to advertisers, and the more Snap will be able to generate revenue from selling ads.

SNAP Outlook and Stock Performance

Snap didn't provide a fourth-quarter outlook, citing uncertainties related to the operating environment. The company did say its board had approved up to $500 million in stock repurchasing over the next 12 months given its $4.4 billion in cash, cash equivalents, and securities as of the end of the third quarter.

Snap shares dropped 29.1% to $7.65 as of 9:42 a.m. New York time on Oct. 21. Snap stock is down 86% in the past year, compared with a 19% drop in the S&P 500.

Snap's next earnings report (for Q3 FY 2022) is expected be released on Feb. 7, 2023.

Article Sources
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  1. Snap Inc. "Snap Inc. Announces Third Quarter 2022 Financial Results."

  2. Wall Street Journal. "Snapchat's Roaring IPO: Everything You Need to Know."

  3. Yahoo! Finance. "Snap's slowing ad growth sends inflation fears through tech sector."

  4. Snap Inc. "Investor Letter Q3 2022," Page 2.

  5. Visible Alpha. "Financial Data."

  6. Bloomberg. "Snap Falls Victim to TikTok's Rapid Growth."

  7. Wall Street Journal. "Three Things Marketers Should Know About Ad Spending Trends."

  8. Snap Inc. "Form 10-K for the Fiscal Year Ended Dec. 31, 2021," Page 5.

  9. Yahoo! Finance. "Snap, Inc. (SNAP)."

  10. TradingView. "Price Chart: SNAP and S&P 500."

  11. MarketScreener. "SNAP, INC. (SNAP)."

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