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Shares of Snap Inc. (NYSE: SNAP ) fell 12% on Wednesday, a day after the company reported fourth-quarter 2022 earnings results and provided lackluster guidance. Revenue was in line with expectations and earnings exceeded projections but slow growth and a dent in profits disappointed the Street. Here’s a look at the good and the bad from the Q4 report:
slow revenue growth
Snap reported revenue of $1.3 billion for the fourth quarter of 2022, which was in line with expectations but remained flat compared to the year-ago period. Snap’s revenue growth has slowed over time, from 38% in the first quarter of 2022 to 6% in the third quarter. So the lack of growth in the latest quarter does not sit well with the Street.
The revenue growth was affected by a double-digit decline in the brand-oriented business. The company continues to face challenges in the form of macroeconomic headwinds, platform policy changes, and increased competition that make the operating environment difficult. At the same time, the direct response business can grow 4% year over year as companies make progress in measurement and optimization.
Drop profit
Snap reported adjusted EPS of $0.14 in Q4, which exceeded forecasts but was down 38% from the year-ago quarter. The company also posted a net loss of $288 million, or $0.18 per share, on a GAAP basis compared to net income of $22.5 million, or $0.01 per share, in the year-ago period.
user growth
On the bright side, Snap’s daily active users (DAU) grew 17% year over year to 375 million in Q4. DAU is increasing sequentially and annually in all regions. DAUs reached 100 million in North America while in Europe, it reached 92 million. Rest of the World DAUs are 183 million and the company sees significant potential for community growth in the long term in this segment. For the first quarter of 2023, Snap expects DAUs to be between 382-384 million.
Gloomy sight
Snap did not provide guidance for the first quarter of 2023 due to a challenging operating environment and expects the headwinds it faced in Q4 to persist in Q1. In its quarterly call, the company said it has seen revenue decline 7% YoY so far in Q1. Internal estimates assume revenue will decline 2% to 10% YoY in Q1.
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