Snap Inc. has reported its slowest quarterly growth in more than a year, with a temporary fault in its advertising system and high competition from Meta and TikTok affecting results.
Shares fell over 16% in after-hours trading on Tuesday, the worst in more than twelve months.
The problem, now resolved, allowed certain ads to run at far lower prices than intended, affecting revenue and unsettling advertisers. “The digital ad tailwinds that propelled Meta and Reddit to blowout quarters turned into a light breeze for Snap,” said eMarketer principal analyst Jasmine Enberg. “There is little room for mistakes.”
Meta reported a 22% surge in ad revenue to $47.5 billion in the same period, while Reddit’s jumped 84% to $465 million. By contrast, Snap’s ad revenue grew just 4%, stressing its struggle to match competitors that offer greater scale and more precise targeting.
Snap said Ramadan’s timing influenced ad spend patterns in key markets, and the end of the U.S. “de minimis” duty-free import exemption prompted some Chinese advertisers to cut budgets. April saw a 1% drop in ad revenue, before partial recovery in May.
Chief Financial Officer Derek Andersen noted that June saw a wider rollout of Sponsored Snaps, short video ads appearing in user inboxes, across the United States and other markets. The company claims this is delivering “more user actions and deeper engagement” with ad content.
Revenue for the quarter ended 30 June came in at $1.34 billion, up 8.7% year-on-year and in line with expectations, but slower than the double-digit growth of the past five quarters. Net loss widened to $263 million from $249 million a year earlier. Average revenue per user fell short at $2.87 versus the $2.90 analysts had forecast.
Small and medium-sized businesses drove most of the advertising profits, while its subscription service Snapchat+ continued to expand, with a 42% rise in paying users to nearly 16 million. Daily active users increased 9% to 469 million, slightly above market estimates.
Snap forecasts third-quarter revenue between $1.48 billion and $1.51 billion, matching analyst consensus. The company is also restructuring engineering teams, with Ajit Mohan now heading ad technology.
Beyond its core platform, Snap is pushing into augmented reality hardware, aiming to launch its first standalone AR glasses in 2026. The device is intended to be lighter and more functional than existing products, with ambitions to beat Meta to market.
