The company reported ($2.31) earnings per share for the quarter, missing analysts' consensus estimates of ($2.05) by $0.26.
Shares tumbled 23% in after-hours trading to wipe some $6 billion from Snap's market value, a reversal for the company after a red-hot March initial public offering that was the biggest for a USA tech company since Facebook's 2012 debut. The result was impacted by a US$2 billion share-based expense related to the company's IPO, which held its initial public offering (IPO) in March. As a result, Snap's stocks took a awful beating, pushing shares down by 25 percent by the end of the day.
The shares closed at $22.98 on Wednesday, but are likely to sink on Thursday following the 23% fall in after-hours trading to $17.65.
On Wednesday, Snapchat parent company Snap, Inc. posted a huge loss along with a slowdown in its user growth, while its revenue came up short of expectations of Wall Street in its first report for earnings as a public entity.
Revenue jumped almost four-fold to $149.6 million but fell short of the average analyst forecast for revenue of $158 million, according to Thomson Reuters I/B/E/S.
Rob Sanderson, an analyst at MKM Partners, says investors are anxious that unless [the company] quickly starts adding users, Snap's ability to sell more advertising will stabilize at some point.
Snap CEO Evan Spiegel isn't anxious about Facebook. "Just because Yahoo has a search box doesn't make it Google". Snap's user growth, it states, will be key to watch going forward. ARPU was $0.90, up from $0.32 in the year-ago quarter, but down from $1.05 in the fourth quarter of 2016. But by then, Facebook had 552 million, more than three times Snapchat's.
For years, Facebook has been trying to copy Snapchat.
Instagram revealed last month that there were more than 200 million daily active users for Instagram Stories, its Snapchat clone - or more than the number of daily users for Snapchat itself.
The firm found that 35 percent of Snapchat users do not use Facebook on a daily basis.
Snap CEO Evan Spiegal said: "It is an easy way to grow daily actives quickly but we do not think those techniques are sustainable over the long term and it impacts our relationship with customers", according to The Guardian. These companies launched Snapchat-esque features which allow users to take a photo and send it to someone, or display it at the top of the app as a "story".