Originally reported by Reuters
Snap Inc. is feeling the heat.
The parent company of Snapchat posted its slowest quarterly revenue growth in over a year, triggering a sharp 16% drop in share value during after-hours trading. The setback stemmed from a temporary malfunction in its ad platform — one that inadvertently allowed some ads to run at deeply discounted rates — and growing advertiser preference for larger, more established rivals like Meta and TikTok.
While Snap confirmed the issue has since been resolved, the incident appears to have rattled investor confidence at a time when digital ad budgets are already under pressure from global economic uncertainty.
Digital Tailwinds Aren’t Lifting All Boats
Where Meta and Reddit have recently delivered strong ad revenue results — capitalizing on a recovery in digital advertising — Snap appears to have stalled. As Jasmine Enberg, principal analyst at eMarketer, noted, “The digital ad tailwinds that propelled Meta and Reddit to blowout quarters turned into a light breeze for Snap.”
In a highly competitive ad landscape, “there is little room for mistakes.”
Snap’s Q2 revenue came in at $1.34 billion, reflecting 8.7% growth year-on-year — a figure broadly in line with analyst expectations, but well below the double-digit growth it has enjoyed in the past five quarters. The company’s net losswidened to $263 million, up from $249 million a year ago.
Headwinds Beyond the Glitch
Snap attributed some of the softness to the timing of Ramadan, which impacted global ad spending, and the recent end of the U.S. “de minimis” exemption — a trade rule that allowed for duty-free imports below a certain value. The policy change prompted some Chinese advertisers to scale back their budgets, adding another layer of pressure to Snap’s ad revenues.
In April, ad revenue growth briefly dipped to just 1%, before stabilizing in May and encouraging the company to launch Sponsored Snaps, a new video ad format integrated directly into user inboxes. Rolled out more broadly in June, the format is already driving higher user interaction and deeper ad engagement, according to CFO Derek Andersen.
Betting on Subscriptions and SMBs
On the diversification front, Snap continues to place strategic emphasis on Snapchat+, its subscription service, which grew its subscriber base by 42% to nearly 16 million. Small and medium-sized businesses (SMBs) also played a key role in driving advertising revenue this quarter — a signal that Snap’s grassroots appeal is holding, even as it loses share among larger advertisers.
Meanwhile, daily active users reached 469 million, slightly beating estimates and showing 9% growth year-on-year.
Looking ahead, Snap has issued Q3 revenue guidance between $1.48 billion and $1.51 billion, matching analysts’ expectations and indicating cautious optimism about a potential rebound.
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