Snap reports a 'challenging' quarter in which missed sales and profit expectations

When Snap reported first-quarter results on Thursday, it fell short of Wall Street's profit and sales expectations and forecasted disappointing revenue growth in the current quarter. However, daily users increased by 18% per year, which was higher than expected.

Snap was down about 4% before recovering to rise more than 7% in volatile extended trading. It ended up increasing by less than 1%.

Spiegel attributed some of Snap's problems during the quarter to macroeconomic factors, such as advertisers who paused their campaigns following Russia's invasion of Ukraine in February.

Snap said it expected revenue to rise between 20% and 25% in the June quarter, lower than Wall Street's estimate of 28%. It anticipates 344 million daily users, exceeding expectations of 341.4 million.

The company's adjusted EBITDA will be between breakeven and $50 million in the second quarter. Despite a 38 percent increase in overall revenue year over year, Snap reported a more extensive net loss also less free cash flow on an annual basis during the March quarter.

According to Snap CFO Derek Andersen, other factors affecting advertising customers include supply chain disruptions, labor shortages, inflation, and the impact of rising interest rates.

According to Andersen's prepared remarks, Snap may continue to face a challenging operating environment that causes customers to pause their campaigns or reduce their advertising budgets.

Snap is also dealing with issues related to Apple's 2021 privacy change, which will make it more challenging to target and measure ads on iPhones. Andersen stated that the tool developed by the company to address the problem now accounts for 90 percent of the company's direct response advertising revenue.

Snap said that if not for a $92 million unrealized loss on a previous investment that went public last year, the company's net income would have increased by 7% year over year. A Snap representative declined to reveal the nature of the investment.