Snapchat Loses 3 Million Daily Users, but Beats Expectations in Q2 Earnings

By Janko Rottgers

LOS ANGELES (Variety.com) – Investors sent Snap’s stock on a rollercoaster ride Tuesday following the company’s Q2 2018 earnings release: Share prices for Snapchat’s corporate parent gained more than 10% immediately following the release of news that the company beat analysts’ revenue and earnings estimates, and that Saudi prince Alwaleed bin Talal had acquired a 2.3% stake in the company with a $250 million investment.

But the share prices gave up much of those gains soon after, as the news sunk in that the company’s user base wasn’t growing as expected, with losing daily active users quarter-over-quarter for the first time in its history.

Snapchat ended the quarter with an average of 188 million daily active users, compared to 191 million at the end of Q1. CEO Evan Spiegel blamed the decline on “the disruption caused by our redesign” in prepared remarks for Tuesday’s earnings call. That redesign, which the company had launched at the beginning of this year, had led to a widespread backlash, which included celebrities like Kylie Jenner and Chrissy Teigen publicly chastising the company.

On Tuesday, Spiegel said the company had responded to the backlash against the redesign: “We feel that we have now addressed the biggest frustrations we’ve heard and are eager to make more progress on the tremendous opportunity we now have to show more of the right content to the right people,” he said.

The company also tried to deflect from its growth problems by announcing that it had 100 million monthly active users in North America at the end of the quarter. Snap previously didn’t disclose any monthly user numbers, with executives arguing that daily actives better reflected the activity on the platform.

Snap generated some $262.26 million in revenue during the quarter ending June 30, compared to $181.67 million during the same quarter a year ago. Net losses came in at $353.31 million, compared to $443.09 million a year ago. This translates to a net loss of $0.14 per share, compared to net losses of $0.16 per share in Q2 of 2017.

Analysts had expected net losses of $0.17 per share in revenue of $251.19 million. The company had previously warned that its revenue growth would decelerate in Q2.

Other highlights from Tuesday’s earnings release:

• Snapchat users spend 30 minutes per day on average using the app, and generated over 3 billion snaps per day.
• Eleven of Snapchat’s shows reached an audience of over 10 million users during the quarter, compared to seven shows in Q1.
• Average revenue per user came in at $1.40, compared to $1.05 a year ago.
• Snap only brought in $2 million in non-advertising revenue. That’s despite the introduction of a new model of Spectacles this quarter. “We are learning a lot as we continue to iterate based on customer feedback,” Spiegel said about the smart glasses.