Slammed by a weakening economy, increased competition from TikTok and recent privacy changes on iPhones, the Snapchat owner missed second-quarter revenue targets and warned that “forward-looking visibility remains incredibly challenging.”
Its shares collapsed 26%, bringing Snap’s loss in 2022 to over 70%.
With Wall Street already worried about a potential recession, Snap’s report also sparked a selloff in rival internet ad sellers. Meta dropped 5% in extended trade, while Alphabet fell 3% and Pinterest tumbled 7%.
Twitter’s shares fell less, losing just under 2%.
The drop in Alphabet’s shares cut its market capitalization by over $40 billion, and Meta’s loss reduced its market capitalization by about $25 billion. The drop in Snap’s shares evaporated $7 billion of its value.
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Snap’s poor report also hit other growth stocks, with Spotify Technology, Shopify and Roblox down around 3% each after hours.
With Twitter suing Elon Musk to force the billionaire to make good on his April promise to buy Twitter for $44 billion, many investors view Twitter’s stock as a wager on the outcome of that upcoming legal battle, and less as a reflection of the company’s current fundamentals.
Twitter is set to report its quarterly results early on Friday, but the micro-blogging platform has canceled its traditional call with analysts, pointing to Musk’s “pending acquisition”.
In its report, Snap said its daily active users rose 18% year-over-year to 347 million, beating analysts’ expectations.
But that user growth comes as the customers of social media companies face inflation at 40-year highs and brace for a potential economic downturn, an environment where brands spend less on advertising and apply greater scrutiny to how they spend their advertising dollars.
Alphabet posts its second-quarter results on July 26, Meta reports on results on July 27, and Pinterest on Aug. 1.