Snap (SNAP) shares plunged more than 18% on Wednesday after the company reported second-quarter earnings and revenue that fell short of Wall Street expectations—largely due to a critical malfunction in its advertising platform.
In Q2, Snap’s advertising revenue grew by just 4% year-over-year to $1.17 billion, marking the slowest pace in over a year. That figure also missed analysts’ consensus estimate of $1.22 billion, according to Bloomberg.
During a post-earnings call with analysts, Snap revealed that a glitch in its auction system—used to price and distribute ads—caused campaigns to be sold at “substantially reduced prices,” directly impacting overall ad revenue.
The company’s adjusted earnings per share came in at $0, below the $0.02 analysts were expecting. Revenue for the quarter was $1.34 billion, also missing the $1.35 billion consensus estimate.
Though Snap posted stronger-than-expected global daily active users—469 million versus the 468 million forecast—North American user growth slightly lagged expectations, with 98 million users reported versus the 99 million anticipated.
The weak report came despite high expectations following strong advertising performance from other tech players including Meta (META), Reddit (RDDT), Alphabet (GOOGL, GOOG), and Amazon (AMZN). CEO Evan Spiegel has been working to strengthen Snap’s advertising business, but this quarter’s stumble renewed investor skepticism.
“SNAP had a tough Q2,” RBC Capital Markets analyst Brad Erickson wrote in a note to clients. “Most importantly, Q2’s execution on ad platform development & surface expansion efforts did not go according to plan, which will continue to reinforce the bear case that SNAP cannot break out of being a smaller ad platform lacking the ability to durably grow its direct response business in-line with the market.”
Snap stock is now down nearly 29% year-to-date, significantly underperforming rivals like Meta and Reddit, which are up 31% and 26%, respectively.
Despite the Q2 setback, Snap’s Q3 guidance offered a glimmer of optimism. The company expects third-quarter revenue to land between $1.48 billion and $1.51 billion—above analysts’ midpoint estimate of $1.48 billion. It also projects Q3 adjusted EBITDA of $117.5 million, topping expectations of $116.1 million.
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