Snap Misses Q1 Earnings Targets, Daily Users Hit 332 Million as Growth Slows

Snap, the parent company of Snapchat, fell just short of Wall Street forecasts for the first quarter of 2022 — and its net loss increased by 25% — with CEO Evan Spiegel citing a “challenging operating environment.”

The media and messaging app company gained 13 million average Snapchat daily active users worldwide for the period, to stand at 332 million — exceeding its previous expectations of hitting 328 million-330 million average DAUs. At the same time, Snapchat’s year-over-year user growth rate was 18% for Q1, a slowdown versus 22% in the year-prior quarter and 20% for Q4 2021.

In addition, of the 13 million net new DAUs, 10 million were outside its core North America and Europe markets. In North America, Snapchat average DAUs grew by 5% year-over-year to reach 98 million and in Europe grew by 10% to reach 84 million.

Snap stock was up more than 4% in after-hours trading Thursday, after initially declining.

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“Our first quarter results reflect the underlying momentum in our business through a challenging operating environment,” Spiegel said in announcing the Q1 results. “We remain focused on providing value for our growing community, delivering ROI for our advertising partners, and investing against our enormous opportunity in augmented reality.”

For Q1, Snap’s revenue rose 38% to $1.063 billion while its net loss was $360 million, an increase of 25% compared with $287 million in the prior-year quarter. The company reported an adjusted net loss of 2 cents per share. Wall Street analysts on average had expected Snap to post revenue of $1.07 billion and adjusted EPS of 1 cent, per financial data provider Refinitiv.

Spiegel, in prepared remarks, touted Snap’s free cash flow of $106 million for Q1, marking its third quarter of positive free cash flow. “While we are pleased with our progress given the macroeconomic environment, we also recognize that we have a significant amount of work to do to realize our long-term opportunity, and we believe we are well positioned to invest through the turbulence,” he told investors.

Snap had reported its first-ever net profit for Q4 2021, managing to earn $22.6 million after years of red ink. The company had provided guidance for Q1 revenue to be between $1.03 billion and $1.08 billion and adjusted EBITDA to be roughly breakeven.

For the second quarter, Snap expects revenue growth to be between 20% and 25% with adjusted EBITDA forecast to be between breakeven and $50 million.

On April 28, the company is hosting its annual Snap Partner Summit, where it expects to announce several new products and services.