Snaps Q2 earningsreport was another failure on a long, downward route for the social media company as user growth slowed under the pressure of Instagram. Snap added 7.3 million daily active users to reach 173 million with a 4.2 percent growth rate, slower than the 5 percent growth that got it to 166 million DAU in Q1. Snap missed on revenue that reached $181.6 million with a loss of – $0.16 earnings per share. Thats compared to Wall street estimates of $185.8 million in revenue and a loss of – $0.14 EPS plus 175 million users.
Snap lost $443 million this one-quarter, up nearly 4X from $116 million in Q2 2016, showing its marketing and sales expenditures are ballooning despite it still missing on earnings.
Investors we spoke to wanted to see daily active user counting grow 5 million, to at least 171 million, and median revenue per user above $1.05 or $1.10. Median revenue per user was actually $1.05, up a strong 16 percent from Q1. Total revenue grew 153 percent year-over-year, up 21 percentage from $149.6 million in Q1 revenue. But with slowing user growth, that wasnt enough to satisfy investors.
Snap had closed at $13.69 today just before earnings, and immediately fell more than 16 percent on the bad news, to hover just above $11.50.
One bright spot in the earnings was that Snapchat added 4 million users in the lucrative North America region compared to 3 million the last two quarterss. Another was that Snap boosted its ARPU significantly in the Rest of World, from $0.19 in Q1 to $0.29 in Q2, demonstrating that its learning to monetize lower-bandwidth users.
Investors hoped that Snaps shrinking user growth rate was just a phase, and that it would bounce back from competition. It insured 17.2 percent growth in daily users in Q2 2016, but that fell dramatically after Instagram launched its clone of Stories, falling to a low of 3.2 percentage in Q4 2016. Yet Snap couldnt build on last one-quarters 5 percent growth, and the slippage has dragged down its share price.