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Snap Plunges 17% as Rivals Outpace It in AI-Driven Growth
6 Aug
Summary
- Snap's quarterly revenue growth slows to 8.7% amid advertiser shift to TikTok and Meta
- Glitch in Snap's ad platform leads to discounted ad rates, further impacting revenue
- Analysts say Snap lags rivals in monetization, user engagement, and ad efficacy
On August 6, 2025, Snap Inc. (SNAP) saw its shares plummet nearly 17% in premarket trading as the company grappled with a weak quarter and mounting competition from AI-driven peers.
The Santa Monica, California-based company has been facing significant challenges in recent months. Advertisers have been curtailing their marketing budgets amid economic uncertainty and are increasingly leaning towards larger platforms like TikTok and Meta's Facebook and Instagram. This shift in advertiser focus has taken a toll on Snap's revenue growth, which slowed down to 8.7% from a year ago, despite aligning with estimates.
Adding to Snap's woes, a glitch in the company's ad-buying platform resulted in ads being delivered at discounted rates, further contributing to the slowdown in revenue growth. This is a far cry from the brisk double-digit growth the company had logged over the past five quarters.
Analysts at MoffettNathanson noted that advertisers favor platforms that are closer to users inclined to buy their products, offer a wider range of marketing tools, and can demonstrate a clear return on ad spend. "Snap still lags on all three fronts," they said, adding that "until those factors change, we think the company remains stuck in monetization purgatory."
The Snapchat-parent is now in a tough spot, especially as rivals Meta and Reddit reported strong second-quarter results last week. Snap's stock is down around 12% this year, trailing its competitors Meta and Reddit, which are up 30.3% and 21.8%, respectively, as their AI-driven businesses are making significant strides.
However, Snap is not giving up without a fight. The company said a broader rollout of Sponsored Snaps, a new video ad format that appears in user inboxes, in June across the U.S. and several global regions is driving increased user actions and deeper engagement with ad content. "For Snap to take advantage of its improvements in engagement, it must better prove out the efficacy of its ads to advertisers and lower barriers to advertiser adoption of its products," Morgan Stanley analysts noted.
