Snap, the parent company of Snapchat, whiffed on sales numbers and posted a staggering loss in its first earnings report since going public in March.
The company reported a net loss of $2.2 billion (yes, with a “B”) for the quarter, due in large part to $2 billion in compensation costs tied to going public. Even without that one-time cost, however, Snap’s loss doubled from the same quarter a year earlier.
Snap posted sales of $149.6 million for the March quarter, far below Wall Street estimates. Its user numbers also came in light. Snap had 166 million daily active users in the March quarter, an addition of just 8 million from the previous quarter.
Its stock fell as much as 25% in after hours trading Wednesday, erasing nearly all the gains since it went public at $17 a share.
Evan Spiegel, Snap’s secretive 26-year-old CEO, told analysts on a conference call that he thinks about user growth “through the lens of creativity.”
“The more that we can remove friction from this creative process, the more that people want to use this service, and that’s our strategy,” Spiegel said.
The vague response did little to ease Snap’s nosediving stock.
Ever since Snap publicly filed its IPO paperwork, there have been concerns about the young company’s mounting losses, lofty valuation and the lack of voting rights for shareholders.
But leading up to the earnings report, all eyes were on the one deadly sin for an Internet company: slowing user growth.
“The No. 1 question we receive about Snap is can it sustain its user growth and how big can it be,” Ralph Schackart, an analyst with William Blair, wrote in an investor note this month.
Snapchat added just five million daily active users in the final three months of last year, down from at least 10 million added in each of the previous four quarters. That slowdown coincided with Facebook (FB, Tech30)-owned Instagram launching a Snapchat copycat feature.
See more at CNN.