Snap’s Quarterly Report Shows Growth Stunting due to Middle East Conflict and Ad Market Downfall

SAN FRANCISCO, CA – Snap Inc, the parent company of Snapchat, released its fourth-quarter financial results, reporting on earnings, revenue, user growth, and future expectations.

The company exceeded analysts’ expectations for earnings per share, reporting 8 cents per share compared to the expected 6 cents. However, revenue fell slightly below estimates, coming in at $1.36 billion instead of the expected $1.38 billion. Despite this, Snap saw an increase in its Global Daily Active Users, reaching 414 million, and reported an average revenue per user of $3.29.

Snap attributed some of its revenue weakness to the conflict in the Middle East, stating that the onset of the conflict was a headwind to year-over-year growth in the fourth quarter. Looking ahead, the company forecasted an increase in sales for the first quarter, expecting a growth rate of about 11% at the midpoint of the range.

The social messaging company also disclosed the sales of its Snapchat+ subscription service for the first time, reporting an annualized revenue run rate of $249 million in 2023 with 7 million subscribers. Despite these positives, Snap’s growth in the fourth quarter lagged behind larger digital ad rivals like Meta, Amazon, and Alphabet, all of which reported double-digit expansion in their advertising units.

Additionally, Snap announced that it would reduce its workforce by 10%, or about 500 employees, as part of a reorganization effort to promote in-person collaboration and reduce hierarchy within the company. The company’s net loss for the quarter narrowed to $248.2 million, and it expects an adjusted EBITDA loss between $55 million to $95 million in the first quarter, higher than analyst projections.

The company’s CEO, Evan Spiegel, recently attended a Senate Judiciary Committee hearing on child safety and technology, where lawmakers grilled him and other social media executives over their platforms’ safety measures and regulation.

In comparison to other social media giants, Snap and Pinterest, which will report its earnings later in the week, have struggled to compete, indicating a trend of bigger companies getting even bigger in the digital advertising industry.