Snap’s (NYSE:SNAP) latest earnings report sent its stock down by almost 15% and drove Alphabet (NASDAQ:GOOGL), Meta (NASDAQ:META), and Pinterest (NYSE:PINS) into the red with it.
The company revealed it had missed its revenue estimates of $1.31 billion and achieved $1.30 billion and had slightly fewer DAUs than expected at 375 million instead of 375.3 million.
Furthermore, the Snap's average per-user revenue stood at $3.47—falling short of the $3.49 estimated. On the other hand, Snap’s per-share earnings were better than expected at $0.14 and its report highlighted that 2022 was Shap’s second full year of positive operating and free cash flow.
After the report, other social media platforms like Meta and Pinterest, as well as Alphabet, saw a decline in share price. Unlike Snap, the three companies that are to release their own reports this Wednesday and Thursday recovered most of the stock value after the initial post-earnings dip.
Snap’s report is often seen as the coal canary for social media stocks as most of them depend on similar sources of revenue. As a result, it isn’t uncommon for shares of firms like Meta and Pinterest to react to Snap’s report, as was seen, for example, last year after Q2
Tech Firms Remain Under Pressure Despite the January Rally
While the first month of 2023 saw rallies across the markets and became Bitcoin’s best January in 10 years, major tech companies are still showing signs of being under pressure. This is perhaps best exemplified by the ongoing onslaught of major layoffs that started already in late 2022 with firms like Meta and Twitter.
In mid-January, Alphabet, Google’s parent company announced it would lay off 12,000 people and Amazon (NASDAQ:AMZN) went through an even larger cut amounting to 18,000 workers. In that same week, Microsoft (NASDAQ:MSFT) revealed it would fire 10,000 employees but also announced it would extend its partnership with the creators of ChatGPT by investing up to $10 billion. Furthermore, PayPal (NASDAQ:PYPL) announced it would reduce its workforce by 7% earlier on Tuesday.
It is, however, interesting to note that despite the massive layoffs, that claimed nearly 60,000 employees by last week, most tech companies still have a significantly higher headcount than in 2020. As a result of higher profits during the COVID-19 lockdowns for these companies, many went on a hiring spree in late 2021 and early 2022. Microsoft, for example, is still up by some 30,000 workers despite the massive layoffs announced in mid-January.
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