Snap Results Hit by Disruptions in Digital Ad Market

Chief Executive Evan Spiegel called the quarter “more challenging than we had expected.“

Snap is one of the first tech companies with sales focused on the digital ad market to report results for the January through March period. Facebook parent

Meta Platforms Inc.,

Twitter Inc.

and

Alphabet Inc.

all report quarterly results next week.

Snap, which logged its first-ever quarterly profit in the fourth quarter, reported a net loss of $360 million for the first three months of this year, including a $92 million unrealized loss on an investment. Sales jumped 38% from the year-ago period to $1.06 billion.

Angelo Vino, senior equity analyst at CFRA Research, an investment research firm, said “the results are very good given the environment.”

Shares in Snap, down 4.4% Thursday before the results, rallied more than 5% in after-hours trading.

The company also signaled sales growth this quarter could surpass its forecast. For the current quarter, sales have seen growth so far of around 30%, Chief Financial Officer Derek Andersen said in prepared remarks, slightly ahead of the 20% to 25% guidance the company is giving for the period. “We are concerned that the operating environment ahead could be even more challenging, leading to further campaign pauses or advertiser budget reductions,” he said.

Russia’s assault on Ukraine that began Feb. 24 also had an impact on its business, Snap said. Some advertisers paused spending after Russia’s offensive began, though resumed spending within 10 days, the company said. Snap also said it incurred about $5 million in costs for efforts to support team members affected by the war.

“Our Brand advertising business grew at a relatively slower rate,” Mr. Andersen said. He added that advertisers across numerous industries have expressed concerns about everything from rising costs and interest rates to supply chain disruptions.

Digital ad sales at Snap and other companies were hit after Apple introduced software changes last year that started requiring apps to ask users whether they wanted to be tracked. Many users opted out, making it more difficult for advertisers to target their ads to specific demographic groups and limiting their ability to determine whether ad campaigns were working.

Snap last year warned revenue growth would slow as a result, sending its shares tumbling. Shares in Snap are down about 50% over the past year.

The company said it has been developing new tools to help advertisers resolve those issues and is now focusing on convincing brands to use them.

Snap boosted its number of daily active users to 332 million in the first quarter, up 18% from the year-ago period and slightly ahead of expectations. The company plans to host its annual partner summit next week where it said it plans to unveil new products and features.

Write to Meghan Bobrowsky at [email protected]