A Fresh Take on Snap's Q2 Outlook: Caution and Cost-Cutting Measures
Snap, the parent company of the popular multimedia messaging app, is reducing costs due to economic instability, and won't collaborate with Microsoft's Outlook service.
Snap has announced some major changes, causing a 16% tumble in its shares the day after revealing it won't be providing a Q2 outlook due to economic uncertainties. Despite boasting better-than-expected first-quarter results, the operator of Snapchat is tightening its belt and slashing spending.
In a letter to investors, Snap Inc. admitted that it can't predict "how macro economic conditions may evolve in the months ahead" and subsequently decided not to share formal financial guidance for Q2. The company has faced headwinds at the start of the current quarter and believes it's sensible to continue balancing investment with realized revenue growth.
To achieve this goal, Snap has reduced its expectation for full-year adjusted operating expenses to between $2.65 and $2.70 billion, down from the previous estimate of $2.70 billion to $2.75 billion. Meanwhile, its forecasted 2025 stock compensation has been lowered to $1.13 billion to $1.16 billion, compared to the previous prediction of $1.15 billion to $1.20 billion.
Q1 Results Top the Charts
Despite the uncertainty that followed, Snap surpassed expectations in its Q1 2025 results. The company reported a net loss of $0.08 per share and revenue that surged 14% year-over-year to $1.36 billion. Analysts had projected a loss of $0.14 per share and revenue of $1.35 billion.
CEO Evan Spiegel celebrated the milestone of 900 million monthly active users and attributed the revenue increase to progress in direct-response advertising solutions, continued momentum for small and medium-sized businesses, and the growth of the Snapchat+ subscription business.
Unfortunately, Snap's shares have slumped nearly 30% so far in 2025, with the lack of guidance and cost-cutting measures causing a 14% after-hours drop on the day of the announcement. Analysts from HSBC and Citizens JMP have since revised their price targets, citing potential growth and user engagement challenges.
In a nutshell, Snap's cautious approach and cost-cutting measures are a response to the volatility stemming from broader economic uncertainties and the ever-changing advertising market.
- The decision by Snap Inc. not to provide a Q2 outlook due to economic uncertainties has led to a reduction in expectations for full-year adjusted operating expenses, with the new estimate ranging from $2.65 to $2.70 billion.
- The company's Q1 2025 results outperformed expectations, with a net loss of $0.08 per share and revenue of $1.36 billion, an increase of 14% year-over-year.
- In the letter to investors, Snap Inc. noted that it can't predict how macro economic conditions may evolve in the months ahead and thus decided not to share formal financial guidance for Q2.
- Snap's cost-cutting measures, including slashing spending and lowering its forecasted 2025 stock compensation, have contributed to a 14% after-hours drop in its shares the day of the announcement.
- The company, which boasts 900 million monthly active users, plans to balance investment with realized revenue growth, as it believes it's sensible in the face of economic uncertainties and the ever-changing advertising market.
