Snap falls after cutting revenue forecast, slowing hiring

SAN FRANCISCO (BLOOMBERG) - Snapchat owner Snap cut its revenue and profit forecasts below the low end of its previous guidance, sending shares plunging as much as 31 per cent and pushing other social media stocks down.

The company will also slow hiring, filling 500 roles before the end of the year, chief executive officer Evan Spiegel said in a note to staff.

"Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labour disruptions, platform policy changes, the impact of the war in Ukraine, and more," he wrote in the memo obtained by Bloomberg.

Snap benefited from a surge in usage of its Snapchat app during the pandemic when people were looking for entertainment and connection from their homes. Now, as people return to offices and schools, the company is reeling from the same combination of economic pressures that are also facing its competitors.

As a result, it believes it is likely that it will report revenue and adjusted earnings before interest, taxes, depreciation and amortisation "below the low end" of its guidance range for the second quarter of 2022.

The company's second-quarter forecast for 20 per cent to 25 per cent year-on-year revenue growth was already below analysts' estimates. The warning immediately hit other companies reliant on advertising, including Meta Platforms, Twitter, Alphabet and Pinterest.

The companies "are having to bring these unattainable, unrealistic investors' expectations back down to earth", said Mr Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors, on Bloomberg Television on Monday (May 23).

"Underlying growth is slowing as these companies mature and it gets more competitive," he added.

Mr Suzuki's firm, which has about US$15 billion (S$20.7 billion) of assets under management, does not hold Snap stock directly.

The platforms are all competing for ad dollars at a challenging time. Advertisers are facing a shaky economy as well as recent privacy changes, such as Apple's tracking restrictions, which have slowed businesses that were booming during much of the pandemic.

Facebook parent Meta last month cut spending because of the macroeconomic environment. Twitter recently announced a hiring freeze and other cost-cutting measures to try to save cash.

"The global macroeconomic environment has become less favourable, the war in Ukraine has impacted our results and may continue to do so," Twitter CEO Parag Agrawal said in an e-mail to employees. "Many other companies have been experiencing a similar effect."

Snap's Mr Spiegel told staff that company leaders have been asked to review spending to see if there are any other areas worth cutting.

"Our most meaningful gains over the coming months will come as a result of improved productivity from our existing team members," he wrote.