Snap shares plunged 30% in extended trading on Monday after CEO Evan Spiegel warned in a note to employees that the company will miss its own targets for revenue and adjusted earnings in the current quarter.
The social media company will also slow hiring through the end of the year as it looks to manage expenses, Spiegel wrote. Part of the letter was filed with the Securities and Exchange Commission.
“Today we filed an 8-K, sharing that the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month,” Spiegel wrote in the note. “As a result, while our revenue continues to grow year-over-year, it is growing more slowly than we expected at this time.”
In April, Snap reported first-quarter earnings that missed Wall Street expectations for sales and profit. At the time, the company said it expected between 20% and 25% year-over-year growth in revenue. It forecast adjusted earnings before interest, taxes, depreciation and amortization of between $0 and $50 million.
“We believe it is now likely that we will report revenue and adjusted EBITDA below the low end of the guidance range we provided for this quarter,” Spiegel wrote in Monday’s update.
The news hit the online advertising market hard, sending many of Snap’s peers tumbling after hours. Shares of Facebook parent Meta dropped 7% in after-hours trading. Twitter fell almost 4%, while Pinterest slid 12%. Outside social media, shares of advertising companies also fell after hours — Google parent Alphabet was off more than 3%, while The Trade Desk fell more than 8%.
Spiegel said Snap will continue to recruit new employees, but will slow its pace of hiring for the rest of the year. He still expects Snap to hire 500 new employees before the end of the year, according to the note. The company hired about 2,000 employees over the last 12 months.
The maker of the Snapchat app is facing rising inflation and interest rates, supply chain shortages, labor disruptions and platform policy changes like Apple’s iPhone privacy feature, according to Spiegel. There’s also a negative impact from the war in Ukraine.
“Our most meaningful gains over the coming months will come as a result of improved productivity from our existing team members,” Spiegel wrote.
As of Monday’s close, Snap shares were down over 50% for the year, compared to the 17% drop for the S&P 500. After hours, the stock dropped 28% to $16.15. Should it fall more than 26.6% on Tuesday, it would be the worst day for the stock since the company went public in 2017.