Snap warns inflation could hit revenue growth, forecasts higher users

Snap on Thursday (Apr 21) forecast a rosy outlook for user growth on its Snapchat app, but said supply-chain disruptions and inflation could continue to hurt advertising demand.

Shares of Snap fell as much as 10 per cent immediately after the results, but pared losses later on as investors digested the mixed results.

Snap forecast second-quarter daily active users at between 343 million and 345 million, above Wall Street estimates of 340 million.

However, the company warned that inflation, labor shortages and other economic challenges could pressure revenue. It forecast second-quarter revenue growth between 20 per cent and 25 per cent over the previous year. The growth rate so far in the current quarter has been 30 per cent.

The Santa Monica, California-based company is the first of the major tech apps to report first-quarter earnings, and the results could cast a shadow over Facebook owner Meta Platforms Inc and Twitter Inc, which also earn revenue by selling digital advertising and will report results next week.

A large number of advertisers paused their ad campaigns in the days following Russia’s invasion of Ukraine in late February, said Snap Chief Financial Officer Derek Andersen, in prepared remarks released before an earnings call with analysts.

While the majority of advertisers resumed their campaigns, many remained concerned about inflation and continuing geopolitical risk, he said.

Revenue for the first quarter ended Mar 31 was US$1.06 billion, an increase of 38 per cent from the prior-year quarter. The figure missed analyst expectations of US$1.07 billion, according to IBES data from Refinitiv.

Daily active users on Snapchat rose 18 per cent year-over-year to 332 million, beating consensus estimates of 329.7 million users. CNA