Snap Inc. shares edged up 1.6% on Wednesday to $4.53, breaking a five-session losing streak. However, the broader market remained weak, with the Nasdaq Composite falling 0.43% to 25,476.64 as technology stocks struggled.
The modest rebound does little to offset the steep decline since the June 16 launch of Specs, Snap's augmented-reality glasses. The stock has dropped roughly 12% from its $5.16 closing price on launch day to $4.54 on Wednesday, according to historical data.
At the heart of investor concern is the sheer scale of Snap's investment in Specs. The company has spent over $3.5 billion on the AR glasses, an amount that represents approximately 46% of Snap's total market capitalization of $7.5 billion. This outsized commitment has raised red flags among analysts and shareholders alike.
Adding to the pressure, Meta Platforms and EssilorLuxottica launched their latest AI-powered smart glasses on Tuesday at a starting price of $299. That is a fraction of the $2,195 price tag for Snap's Specs, which are scheduled for delivery this fall in the U.S., Britain, and France. Meta already dominates the smart-glasses market with a 76.1% share of global shipments last year, per IDC data cited by Reuters, as the market reached 9.6 million units.
Snap CEO Evan Spiegel has framed Specs as a fundamentally different product. "We wanted to build a totally new type of computer," Spiegel told Reuters, noting that Specs packs capabilities found in pricier headsets into a smart-glasses form factor. The company is betting that more advanced AR features will attract developers and create a unique ecosystem, even if it means higher costs and longer development timelines.
However, analysts remain skeptical about consumer appetite at the current price point. "The price point is still a bit on the high end of what consumers expect from AR glasses," said Anshel Sag, an analyst at Moor Insights & Strategy. "Building full AR glasses is extremely difficult and expensive."
Despite investor calls for near-term profitability, Spiegel remains focused on the long game. "While investors may want more short-term profitability, our job at Snap is to drive long-term profitability and the long-term success of the company," he told Reuters.
Snap's core business provided some breathing room in the first quarter. Revenue rose 12% year-over-year to $1.53 billion, free cash flow reached $286 million, and the net loss narrowed to $89 million. The platform ended the quarter with 956 million monthly active users and 483 million daily active users. Spiegel also highlighted Snap Map, which now has 450 million global monthly active users sharing location, calling its Promoted Places feature a "smash hit" in an interview with Axios.
Yet, the risk is that Specs continues to drain resources and management attention from the advertising business, especially as Meta moves to make AI glasses more affordable. If advertisers pull back or consumers resist the $2,195 price, Snap may need to seek external funding for Specs or scale back its ambitions. Spiegel has indicated the company will share more details on long-term partnerships "later this year," and in January, Snap set up Specs as an independent subsidiary to facilitate outside investment.
