(Bloomberg) — Snap Inc. cut its revenue and profit forecasts below the low end of its previous guidance, sending shares plunging as much as 31% and pushing other social media stocks down.
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The company will also slow hiring, Chief Executive Officer Evan Spiegel said in a note to staff. “Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more,” he wrote in the memo obtained by Bloomberg.
The collapse in Snap’s share spread to other internet and advertising stocks, with Meta Platforms Inc. falling 7% in pre-market trading on Tuesday. Major advertising houses also dropped, with WPP Plc dropping as much as 3.9% in early trading in London.
In total, social media stocks were on course to shed more than $100 billion in market value following Snap’s announcement.
Read More: Evan Spiegel’s Full Memo to Staff
Snap benefited from a surge in usage of its Snapchat app during the pandemic, when people were looking for entertainment and connection from their homes. Now, as people return to offices and schools, the company is reeling from the same combination of economic pressures that are also facing its competitors.
Snap will add 500 roles before the end of the year, on top of 900 jobs already offered this year. This compares to about 1,800 new staff added over 2021. Both Meta and Uber have cut back on the speed of hiring, after warning about the increasing cost of doing business.
“The macroeconomic environment has deteriorated further and faster than anticipated,” Snap said in a filing. “As a result, we believe it is likely that we will report revenue and adjusted Ebitda below the low end of our Q2 2022 guidance range.”
The company’s second-quarter forecast, for 20% to 25% year-over-year revenue growth, was already below analysts’ estimates. The warning immediately hit other companies reliant on advertising, including Twitter Inc., Alphabet Inc. and Pinterest Inc.
The companies “are having to bring these unattainable, unrealistic investors’ expectations back down to Earth,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors, on Bloomberg Television Monday. “Underlying growth is slowing as these companies mature and it gets more competitive.” Suzuki’s firm, which has about $15 billion of assets under management, does not hold Snap stock directly.
The platforms are all competing for ad dollars at a challenging time. Advertisers are facing a shaky economy as well as recent privacy changes, such as Apple Inc.’s tracking restrictions, which have slowed businesses that were booming during much of the pandemic.
Facebook parent Meta last month cut spending because of the macroeconomic environment. Twitter recently announced a hiring freeze and other cost cutting measures to try and save cash. “The global macroeconomic environment has become less favorable, the war in Ukraine has impacted our results, and may continue to do so,” Twitter Chief Executive Officer Parag Agrawal said in an email to employees. “Many other companies have been experiencing a similar effect.”
Spiegel told staff that company leaders have been asked to review spending, to see if there are any other areas worth cutting. “Our most meaningful gains over the coming months will come as a result of improved productivity from our existing team members,” he wrote.
(Updates with CEO memo to staff, share prices, hiring context.)
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