(Reuters) -Snap Inc missed second-quarter revenue targets on Thursday as record-high inflation and increasing competition from rival apps like TikTok hurt advertising demand, but it reported higher user growth than Wall Street had expected.
Shares of Snap dropped 21% in trading after the bell.
The Snapchat owner is the first of the major tech firms to report second-quarter earnings, and the results could be a bellwether of conditions also affecting Facebook owner Meta Platforms Inc, which reports results next week, and Twitter Inc, which reports on Friday.
"We are not satisfied with the results we are delivering, regardless of the current headwinds," Snap said in prepared remarks released ahead of a conference call with analysts.
Revenue for the second quarter ended June 30 was $1.11 billion, an increase of 13% from the prior-year quarter. The figure missed analyst expectations of $1.14 billion, according to IBES data from Refinitiv.
Recent privacy changes on iPhones, macroeconomic challenges and increasing competition for advertising dollars all contributed to "substantially slowed" revenue growth, Snap said.
The Santa Monica, California-based company said it intended to significantly slow hiring, invest in its advertising business and find new sources of revenue, in order to grow at a faster pace.
Daily active users on Snapchat rose 18% year-over-year to 347 million, beating consensus estimates of 344 million users.
Snap said revenue so far in the current third quarter is flat compared with the prior year, but did not provide revenue guidance because "forward-looking visibility remains incredibly challenging."
Investors are expecting the slowest-ever pace of growth for social media ad revenue this year, as increasing competition from TikTok and Apple Inc in advertising could compound economic conditions.
Snap on Thursday also announced a share repurchase program of up to $500 million.