Snap Shares Fall 39%, Following Dismal Q2 Earnings Report

Shares of Snapchat's parent company tumbled 39% on Friday, just 24 hours after it reported disappointing second-quarter results.

Snap shares fell 39% on Friday, a day after the Snapchat parent company released its Q2 earnings report with dismal results. Snap attributed its disappointing results, which did not meet Wall Street expectations on the top and bottom lines, to several factors, including the weak economy, a slow down in the demand for its online platform, Apple's 2021 iOS update, and steep competition from TikTok.

Snap admitted that they were "not satisfied with the results...regardless of the current headwinds," CNBC reported. Stocks of Snapchat's parent company fell nearly 79% year to date.

A little glimmer of hope, however, was seen in the slight increase of its global daily active users, which was now at 347 million versus the expected 344.2 million expected. Still, this is a small fraction of the nearly two billion daily active users on Facebook.

Impact of Decreasing Value of Snap Stocks Concerning

Snap CEO Evan Spiegel did not speak during the analyst Q&A portion of the Q2 earnings report and refused to provide any commentary about the company's disappointing results, sparking concern among JPMorgan analysts. They said that based on how the call was conducted, the Snapchat parent company now has an "even bigger hill to climb going forward" and that they must "re-establish a track record of execution."

Snap admitted that Q2 revenue is "approximately flat" and that "forward-looking visibility remains incredibly challenging." As a result, the California-based firm said it would significantly cut down on hiring and instead invest in its advertising business and find new sources of revenue to catch up, The Guardian reported.

Snap recently launched a premium service called Snapchat Plus, which has a monthly subscription price of $3.99 and offers other features such as the ability to send messages from the desktop app.

Implications of Snap's Decreasing Value on the Market

Snap's dismal Q2 earnings report and its warning about the challenging economy are bringing down the market. After posting a quarterly net loss of $422 million and concerns over recessions, digital advertisers have become hesitant to spend their money, CNN reported.

Snap's chief business officer Jeremi Gorman told analysts during the Q2 earnings report call that digital advertisers are now reevaluating their priorities due to "macro pressures" and the current economic state. Aside from slowing down hiring to help cut costs, Snap also announced its plans to buy back $500 million in stock.

Meanwhile, Spiegel and Snap's chief technology officer Bobby Murphy have agreed to continue in their roles through at least January 1, 2027, for a salary of just $1 and no stock-based remuneration. Spiegel and Murphy own significant stakes in the Snapchat parent company.

Snap isn't the only tech company facing some major challenges this year. Other tech companies that rely on digital advertising are feeling the crunch, too, such as Facebook's parent company Meta, which was down 5% premarket. Netflix, which has decided to create an ad-supported version of its streaming services, is also down by almost 1%.