Shares of Snapchat-parent Snap went tumbling as much as 16% in after-hours trading on Tuesday after the company reported a steep loss and its second ever decline in sales.
Snap posted a net loss of $377 million from the June quarter, an improvement from its $422 million net loss during the year-ago period but worse than the $66 million loss Wall Street analysts had projected.
Sales also fell nearly 4% from the prior year to $1.07 billion, its second consecutive decline in quarterly sales.
Snap warned that its sales could decline for a third consecutive quarter in the September quarter. Snap said it expects revenue between $1.07 billion and $1.13 billion for the September quarter, which could mark up to a 5% decline from the same period in the prior year.
“Snap’s weak outlook further underlines fears that corporations and small businesses alike are cutting back on digital advertising spending amid the current operating environment,” Investing.com senior analyst Jesse Cohen said in emailed commentary.
One positive highlight from the report: Snapchat’s daily active users grew by 14% year-over-year to 397 million. The company also announced last month that its Snapchat+ subscription service had gained more than 4 million paying customers in its first year.
Snap has been struggling since changes to Apple’s app tracking system made ad targeting more difficult for a number of social platforms. Snap on Tuesday said that improvements to its machine learning systems for ad targeting “have led to more relevant ads.”
Google-parent Alphabet reported strong revenue growth for the quarter ending in June, as its cloud computing business grows and its core digital advertising business stabilizes.
Alphabet reported revenue of $74.6 billion, marking a 7% jump compared to last year and beating Wall Street’s estimates. The company also reported net profit of $18.4 billion, also beating analysts’ estimates.
Shares for Alphabet surged more than 7% in after-hours trading following the results.
Google’s advertising business generated revenue of $58.14 billion, up from $56.29 billion in the prior year. Google’s lucrative Cloud business reported revenue of $8.03 billion, marking a nearly 28% jump compared to last year.
The second-quarter earnings report comes on the heels of a brutal 2022 for the tech giant, marked by steep cost-cutting amid broader macroeconomic uncertainty that hit the tech sector particularly hard. This year has, so far, brought some reprieve to Google.
The strong results could give Google more “room to focus” on “its expansion in the AI field,” Thomas Monteiro, a senior analyst at Investing.com, said in a note Thursday evening.
Like other tech companies, Google has invested heavily in recent months to develop and deploy a new crop of AI tools into some of its core products.
Google is looking for a new CFO.
Ruth Porat, the longtime CFO of Google and Alphabet, is stepping into a new role as the president and chief investment officer of both companies, effective September 1, 2023.
“Ruth will continue to serve as CFO, including leading the company’s 2024 and long-range capital planning processes, while the company searches for and selects her successor,” the company said on Tuesday.
“Ruth has worked to drive financial discipline and returns for shareholders, while spearheading investment to create sustainable, long-term value,” CEO Sundar Pichai said in a statement with the company’s earnings results on Tuesday.
“In her new role,” he said, “Ruth will strengthen our collaboration with policy makers and shape our corporate investments to have maximum economic impact for people and economies around the world.”
Microsoft on Tuesday posted better than expected sales growth during the June quarter thanks to continued strength in its cloud computing unit.
The company posted $56.2 billion in revenue, up 8% from the prior year, and ahead of the $55.5 billion Wall Street analysts had projected. Net income for the quarter was $20.1 billion, up 20% year-over-year and also better than expected.
Sales from Microsoft’s “intelligent cloud” business — its biggest revenue driver — grew 15% from the year-ago quarter to $24 billion. But sales from the company’s “more personal computing” unit, which includes devices, Xbox and Windows commercial products, decreased 4% year-over-year to $13.9 billion, which could indicate that economic uncertainty is weighing on hardware sales.
Microsoft shares dipped around 1.5% in after-hours trading following the report.
In prepared remarks, Microsoft CEO Satya Nadella focused on the company’s big bet on AI.
“Organizations are asking not only how – but how fast – they can apply this next generation of AI to address the biggest opportunities and challenges they face – safely and responsibly,” Nadella said in a statement. “We remain focused on leading the new AI platform shift.”
Tech heavyweights Microsoft, Snap and Google-parent Alphabet are set to report their earnings for the three months ending in June after Tuesday’s closing bell.
The reports come after months of efforts by tech companies to cut costs — including with large layoffs — while also investing more in artificial intelligence tools across their products.
Microsoft and Google will likely focus on their AI efforts. Snap investors, meanwhile, are likely eager to hear how Snapchat is weathering ongoing competitive challenges from rivals like TikTok, as well as adjusting to Apple’s app privacy changes that made targeted advertising more difficult.
Here’s what Wall Street analysts are expecting from tonight’s earnings reports:
MICROSOFT
Revenue: $55.5 billion (+7% YOY)
Net income: $19 billion (+13.5% YOY)
EPS: $2.55
ALPHABET
Revenue: $72.8 billion (+4.5% YOY)
Net income: $16.9 billion (+5.6% YOY)
EPS: $1.34
SNAP
Revenue: $1.05 billion (-5.2% YOY)
Net income: -$66.3 million
EPS: -$0.04
Microsoft and Google are about to offer an early glimpse into how their high-stakes bets on AI are paying off when the two companies report earnings results after the bell.
Microsoft has made a multi-billion dollar investment in OpenAI, the company behind the viral chatbot ChatGPT and begun integrating generative AI features into its core products. Last week, Microsoft unveiled a more-secure version of its AI-powered Bing specifically for businesses and announced that Microsoft 365 Co-pilot, a previously announced AI-powered tool, will cost $30 a month for each user.
Google, meanwhile, is racing to keep pace.
The popularity of ChatGPT and the possible resurgence of Bing carry new threats for Google’s core search business, as some fear these tools could take away users who traditionally turn to Google to ask questions, conduct research, and search the web.
Google has rolled out its own answer to ChatGPT, in the form of a chatbot dubbed Bard. It has also promised more generative AI features will soon be implemented throughout some of its other products.
