Snap announces plans to cut back hiring as it posts bleak results

Snap announced plans to “substantially reduce” hiring and shake up its strategy as it posted bleak second-quarter results, blaming tough macroeconomic conditions but also stating it was “not satisfied with the results . . . regardless of the current headwinds”.

The social media company lost about a quarter of its value on Thursday after posting the results, which chief executive Evan Spiegel said “do not reflect our ambition”.

Revenues at the Los Angeles-based social media company increased 13 per cent to $1.11bn in the three months to the end of June, just shy of analysts’ consensus of $1.13bn.

Net losses stood at $422mn, a drop of 178 per cent year-on-year and far greater than analyst estimates of losses of $340mn, according to data compiled by S&P Capital IQ.

The company had issued an unexpected warning in May that the pace of revenue growth would come in below its initial guidance of between 20-25 per cent, citing a rapidly deteriorating macroeconomic environment.

Spiegel said that Snap planned to focus on product innovation, diversifying revenue and investment in its direct response advertising business in order to address the slowdown.

In a letter to investors on Thursday, Snap said that brands were slashing digital advertising budgets due to the wider economic slowdown and inflationary pressures, as well as privacy changes by Apple that have made it harder to target advertising and measure the success of campaigns.

It also said business had been hurt by increased competition, as new entrants such as Chinese-owned TikTok take market share.

Daily active users rose 18 per cent to 347mn in the quarter, it said.

Snap declined to provide expectations for third-quarter revenue or earnings, citing “uncertainties related to the operating environment”.

Social media platforms — as well as other tech stocks — exploded in growth over the past two years as entertainment-starved users spent more time and money online during the coronavirus pandemic lockdowns.

However, this has turned into a deep and broad stock sell-off in recent months, forcing the biggest tech groups such as Meta and Google to pause hiring and announce other cost-cutting measures.

Snap’s shares fell about 25 per cent to $12.33 on news of its results. Other tech stocks with advertising-based business models were also hit: Facebook parent Meta fell 5 per cent in after-hours trading, while Google-owned Alphabet dropped 3 per cent.

Snap said it intended to drive greater productivity by reducing its rate of hiring and through a “strict reprioritisation of goals and initiatives across the company”.

Separately, it said it had authorised a stock repurchase programme of up to $500mn of its class A common stock. Snap also said that Spiegel and his co-founder and chief technology officer Bobby Murphy had entered into long-term employment agreements with the company. They will serve in their respective roles until at least January 1 2027 on an annual salary of $1.