Thanks to an uptick in shelter in place orders during lockdown, Snap reported largely positive second-quarter results. But the social media platform is anticipating a more challenging Q3. Last week, Snap’s Chief Financial Officer, Derek Andersen, explained the mixed news:
“At the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate,” Andersen said.
Consequently, despite ostensibly positive results, Snap’s stock plummeted 11% in after-hours trading, before levelling up to a smaller decline the following day. This uncertain market response is probably a fair reflection of the company’s mixed results and tentative outlook.
Snap’s daily active users (DAU) rose from 229 million in April to 238 million, a 4% rise that exceeded expectations. It also generated $454.2 million in revenue, a 17% year-on-year increase. But the company’s net losses jumped nearly 28% to $326 million, compared to a net loss of $254 million a year ago.
Ultimately, despite substantial gains, it looks like investors had hoped for a more emphatic Q2 uplift during quarantine’s favourable market conditions.
Going into Q3, Snap is tempering expectations. According to Andersen, the “initial lift dissipated faster than we anticipated as shelter in place conditions persisted.”
Given the uncertainty surrounding the post-COVID economy, it remains to be seen how the rest of 2020 will play out for Snap. The social media company will undoubtedly be paying close attention to Facebook’s Q2 earnings report to see how badly its rival has suffered during the widely reported Facebook boycott. Will Snapchat benefit from Facebook’s projected ad revenue losses?