Snap Inc. (SNAP) shares declined nearly 2% in late trading on Friday, closing at $5.80, as the company continues to struggle with sluggish advertising revenue growth. The stock's performance lagged behind the broader market, with the SPDR S&P 500 ETF and Invesco QQQ Trust both posting gains on the day.
The company reported first-quarter results that showed a 12% increase in total revenue to $1.53 billion, but advertising revenue—the core of Snap's business—rose only 3% to $1.24 billion. This weakness in ad spending, particularly from large North American advertisers, has weighed heavily on investor sentiment.
Snap's daily active users (DAUs) reached 483 million, while monthly active users hit 956 million. CEO Evan Spiegel noted that the company has "returned to growth in daily active users," but the market remains focused on the advertising side.
Other revenue streams, including subscriptions and new paid features, surged 87% to $285 million, providing some bright spot. However, the overall picture shows a company still grappling with the challenge of attracting major advertisers away from larger rivals like Meta Platforms and Pinterest, both of which also traded down on Friday.
Trading volume for Snap was below average, and the stock remains well below its 52-week high of $10.41, reflecting a significant decline from earlier optimism surrounding artificial intelligence and restructuring efforts.
In April, Snap announced layoffs of about 1,000 workers, roughly 16% of its staff, and closed over 300 open positions. The cost-cutting measures followed pressure from activist investors and are intended to improve efficiency.
Analysts have expressed caution. UBS analyst Stephen Ju maintained a Neutral rating and $7 price target, warning that a rapid rebound in major North American ad budgets appears unlikely as advertisers continue to chase TikTok. Morningstar analysts lowered their fair value estimate for Snap to $7 from $9, citing falling U.S. user numbers.
Snap guided for second-quarter revenue of $1.52 billion to $1.55 billion and adjusted EBITDA between $175 million and $200 million. The company also flagged $95 million to $130 million in restructuring charges, along with ongoing legal and regulatory risks.
For now, the market views Snap as a turnaround story rather than a growth play. The company's next challenge is to demonstrate that its leaner business model can sustain investor interest through the next ad-cycle rebound.
