Shares of Meta Platforms, Alphabet, a company that owns Google, and other businesses that sell online advertising fell late on Thursday after Snap Inc. (SNAP.N), the company that owns Snapchat, cited inflation as the reason for its slowest revenue growth since going public five years ago.
The first major social media company to release its September quarter earnings was Snap, and after the bell, the disappointing results caused its stock to fall 25%. Snap forewarned that the typically busy holiday quarter wouldn’t see any revenue growth.
Shares of other businesses that sell online advertising also decreased, with Pinterest (PINS.N) losing close to 8%, Facebook owner Meta (META.O) losing about 4%, and Alphabet (GOOGL.O) losing 2%. Over $40 billion in stock market value from those and other internet ad companies, such as Spotify (SPOT.N) and Roku, was lost overall as a result of the sell-off in late trading (ROKU.O).
The warning from Snap follows steep declines in social media company stock prices, with Meta’s stock down about 60% year to date and Pinterest’s stock down almost 40%.
Investors are worried that the U.S. Federal Reserve’s plans to raise interest rates quickly to stop inflation that has been high for decades could hurt the economy in a big way.
Snap’s stock, which was last trading at around $8 per share, has now dropped 90% from the close of its all-time high in September 2021. In 2017, Snap made its debut on the stock market with a stock price of $17. This was a highly anticipated IPO.
Snap said in a letter to investors that some advertisers had cut their budgets for marketing because of inflation.
The third quarter’s revenue, which ended on September 30, increased by 6% to $1.13 billion. According to Refinitiv, the amount just barely fell short of analyst expectations of $1.14 billion.
In an effort to reduce costs and brace itself for a weakening economy, the company announced in August that it would fire 20% of all employees and halt projects like gaming and a flying camera drone.
On Tuesday, Alphabet releases its quarterly results, and on Wednesday, Meta.
