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Snap Inc. broke a streak of revenue declines Tuesday as it sported 5% growth on the top line for its latest quarter, but shares dipped after management cautioned that the war in the Middle East was making some advertisers more cautious.
The company logged $1.19 billion in third-quarter revenue, up from $1.13 billion a year before. Analysts were modeling $1.11 billion. Snap’s
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revenue had fallen on a year-over-year basis in each of the prior two quarters.
Shares initially rose in after-hours trading following the report, but they gave back those gains as investors appeared to digest the company’s measured commentary about the impact of the Israel conflict on advertiser spending. The company flagged “pauses in spending from a large number of primarily brand-oriented advertising campaigns immediately following the onset of the war.”
Snap recorded a third-quarter net loss of $368 million, or 23 cents a share, whereas it lost $360 million, or 22 cents a share, in the year-before period. Analysts were modeling a 24-cent per-share loss.
The company had 406 million daily active users for the third quarter, compared with 397 million in the second quarter. Snap matched the FactSet consensus on the metric.
Snap also said Tuesday that its board of directors has approved a stock-buyback program of up to $500 million.
“The goal of the program is to utilize the company’s strong balance sheet to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture,” the company said in its earnings release.
For the December quarter, Snap said that its internal forecasts assume $1.320 billion to $1.375 billion in revenue, whereas the FactSet consensus was for $1.34 billion. The company added that it would be “imprudent to provide formal guidance for Q4” given the war in the Middle East.
“We believe we are on the right path with our direct-response advertising platform and are focused on executing against our roadmap to deliver further improvements,” the company said in its release. “That said, forward visibility of advertising demand remains limited due to several factors.”
Those factors include that, historically, Snap has seen “backweighted” revenue in the holiday quarter. Additionally, the fourth quarter typically brings a higher mix of brand advertising relative to other quarters, and brand advertising grew at a slower pace than direct-response advertising during the third quarter.
“In addition, we observed pauses in spending from a large number of primarily brand-oriented advertising campaigns immediately following the onset of the war in the Middle East, and this has been a headwind to revenue quarter-to-date,” Snap said. “While some of these campaigns have now resumed, and the impact on our revenue has partially diminished, we continue to observe new pauses and the risk that these pauses could persist or increase in magnitude remains.”
