A profit warning from the developer of Snapchat sent the company’s shares plummeting nearly 40% in early trading, triggering the latest in a series of stock market routs that have wiped billions from the value of social media companies amid fears their income could be hit by a global crisis. economic downturn.
“Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than expected,” the company said in an SEC filing released late Monday. Snap said it now expects second-quarter revenue and profit to be below its guidance range, and told staff it would slow the hiring of new hires.
The company’s earnings warning sent its shares tumbling 40% after markets opened to $13.41, well below the $17 level at which Snap made its IPO in 2017. In percentage terms, the fall marked its biggest one-day drop on record, with the bad news reverberating across the industry: Alphabet, the owner of Google, fell 6%, Facebook by 9 % and Pinterest by more than 20%.
Concerns about a global economic slowdown have prompted advertisers to cut spending, sending valuations plummeting for tech companies that depend on marketing spend for the bulk of their revenue.
In a note shared with employees on Monday, Snap Chief Executive Evan Spiegel warned, “Like many businesses, we continue to face rising inflation and interest rates, shortages in the supply chain and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more.
Spiegel said the company will continue to invest in growth and plans to hire more than 500 new team members before the end of 2022, a 10% increase in headcount. However, he added that department heads have been asked to find cost savings in their budgets.
“Our most significant gains over the next few months will come from improving the productivity of our existing team members, as we work together and help our new members discover Snap and learn how to contribute to their full potential.”
For Snap, the earnings warning is an abrupt reversal of fortune. It wasn’t until early February that the company reported its first-ever quarterly net profit, welcome news that contrasts sharply with Facebook’s announcement the previous day that its revenue would decline by $10 billion over the year thanks to confidentiality. -targeted changes in Apple’s operating system for mobile phones.
Snapchat’s advertising products were largely shielded from these changes, with the company focusing on brand advertising rather than hyper-targeted personalized promotions, meaning it’s less reliant on tools to track users across the web and in other apps.