Snap’s stock fell more than 30 percent in after-hours trading on Tuesday after falling short of analyst expectations even as the company reported a 5 percent increase in revenue, its second straight quarter of growth.
Revenue for the three months ended Dec. 31 was $1.36 billion, up from $1.3 billion a year ago but below Wall Street projections of $1.38 billion for Snapchat’s parent company. Net losses for the fourth quarter narrowed to $248 million, from $288 million a year earlier.
“2023 was a pivotal year for Snap, as we focused relentlessly on adding value to our community while evolving our business for long-term growth,” Evan Spiegel, the company’s chief executive, said in a letter to investors.
“While this decision was painful, and we will miss our friends and colleagues, we believe these changes are necessary to achieve our long-term goals” and manage expenses, Mr. Spiegel said in the letter.
Despite its growth, and the digital ad market continuing to rebound, Snap still faces a challenging ad market, and reports from other tech companies have been mixed. Last week, Meta reported that its profit more than tripled, and it issued its first dividend. But Alphabet reported muted ad sales growth, and its search revenue and profit margin missed Wall Street’s expectations.
Over the past year, Snap has been pivoting its business to direct response ads, which let customers click to buy products. Mr. Spiegel said the ad-platform change prompted declining sales during the first half of the year. But, he said, it better positioned Snap’s advertising business for long-term growth.
Analysts, however, have said the app may struggle to find ground with that model, since users primarily use the app to message one another and don’t always see ads.
The company on Tuesday also pointed to successes with new services like Snapchat Plus, a subscription service available since July 2022 that costs $3.99 a month, which now has over seven million paid users. And it said that Snap Star, a creator program that started in early 2022, has lured many content creators onto platform with the promise of earnings from ads posted alongside their public stories.
Snap’s user base continued to grow. Daily active users for the fourth quarter totaled 414 million, a 10 percent increase from a year ago. Monthly active users, typically disclosed once a year, increased by 8 percent and surpassed 800 million.