Snap Inc.’s quarterly income fell short of what analysts expected on Thursday because changes to its advertising platform hurt the demand for ads. The company also warned that next quarter’s results could also fall short of Wall Street’s goals.
The company based in Santa Monica, California, which owns the photo messaging app Snapchat, has been known for a long time to start new social media trends that are later copied by bigger competitors. However, investors have asked if it can turn its investments in new technology like augmented reality (AR) into revenue growth.
Snap said it wouldn’t give formal financial guidance, but its internal prediction for second-quarter revenue is $1.04 billion, which is a 6% drop from the same time last year. IBES data from Refinitiv shows that analysts expected the internal estimate to be $1.13 billion, which is less than what was made.
Snap told investors in a letter that it was taking steps to make ads more relevant to users and make it easier for people to interact with Snapchat ads.
During an earnings call with analysts, Snap CEO Evan Spiegel said, “We are optimistic that the changes we are making to our ad platform are laying the groundwork for future growth.”
Alphabet and Meta Platforms, on the other hand, are the two biggest digital ad platforms in the world. This week, they released positive results for the first quarter, as brands turned to them because they have a wide reach among customers and good ad tools.
Snap’s revenue for the first quarter that finished on March 31 was $989 million. This was less than the $1.06 billion it made during the same time last year, and it was also less than the $1.04 billion that analysts had expected.
Insider Intelligence’s chief expert, Jasmine Enberg, said that Snap’s falling sales show that the company is facing big problems.
Snap’s net loss was $329 million during the quarter. This is less than the $360 million net loss it had the year before.
Along with augmented reality, Snap has put more money into artificial intelligence. Its assistant, My AI, is now available to all Snapchat users around the world.
Last week, at an annual event for content creators, advertisers, and other partners, Snap also announced that My AI will be able to send a totally AI-made image in response to a user’s message.
Spiegel said on Thursday that the company is just starting to try out paid links in the text that is made by My AI.
Wall Street expected Snapchat’s number of daily active users to rise by 15%, which is what happened.
Snap said that in the second quarter, it expects between 394 million and 395 million daily active users.
Thursday, Pinterest Inc. also said that its income for the second quarter would be less than what the market expected. After the bell, its shares fell 13%.
The total stock market value of Snap and Pinterest went down by more than $4 billion on Thursday after their results.
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