Snap Inc. Reports Weaker Than Expected Q1 Earnings

The company blamed its lackluster results on a recent redesign

Snapchat debuted its second-generation Spectacles last week.
Snap Inc.

Snap Inc. shares plunged on Tuesday in after-hours trading, following the company’s weak first-quarter earnings and warnings that growth likely won’t be much better in the near term.

According to the company’s first-quarter earnings released today, revenue for the first three months of the year totaled $230 million—up 54 percent year-over-year but still missing analyst expectations of $245 million. And while total daily active users gained another 4 million for a total of 191 million, it still fell short of the 7 million expected by Wall Street. Meanwhile, average revenue per user was up 34 percent year-over-year to $1.21 per user, but down 21 percent when compared to the previous quarter.

The company blamed its lackluster quarter on seasonality and its recent redesign, which has been widely criticized by its core demographic of teens and millennials. Changes included separating user content from content created by media companies, expanding the Discover section and placing frequent contacts at the top instead of the most recent.

The results come just a week after the company unveiled its second-generation Snapchat Spectacles, the company’s camera-equipped sunglasses.

During prepared remarks on a call with investors, Snap Inc. CEO Evan Spiegel said the new design is “driven by our fundamental belief that separating friends from professional content creators is important to both our mission and the long-term growth of our business.” He said the changes make it easier to find content while also removing the need to compete with professional creators for attention. The approach allows Snap to “take bigger risks and endure the accompanying volatility.”

“In this case, it is our long-standing belief that separating social interactions from media content encourages people to create and share Snaps with each other, while also providing better opportunities and incentives for media partners,” Spiegel said. “We then build and optimize our products around these underlying values, prioritizing them over short-term growth.”

The company said it continues to experience weak performance for Android users, who were more affected by some of design changes. However, Spiegel said the company is working on updates, which will likely be released in the third quarter of this year. Meanwhile, it’s leaning on existing features like Discover and Friend Feed, which are being added to the existing app that could help in the near term.

The company also released a number of stats related to usage:

  • About 60 percent of daily active users now use the camera feature to create snaps.
  • 81 million people watched coverage of the Winter Olympics through Discover in nine different languages.
  • In the U.S., 10 million people tuned in every day of the Olympic Games.
  • User-generated Snaps appeared on jumbotrons during 67 games during the NCAA basketball championships.
  • More than 200 media organizations have featured snaps or embedded the platform’s Snap Map feature into coverage across channels.
  • More than 200 augmented reality lenses were created during the last quarter, which were viewed more than 1 million times in the past few months.