Snap stock jumped Wednesday as the social media company said it would slash 20% of its workforce of more than 6,000 people as part of a companywide restructuring effort.
Snap said it will shutter several projects as it deals with a slowdown in digital advertising, which accounts for the vast majority of its revenue.
The company, which owns and operates the Snapchat social media app, warned it may suffer a period of low revenue growth well into next year.
"It has become clear that we must reduce our cost structure to avoid incurring significant ongoing losses," Snap Chief Executive Evan Spiegel said in a memo to staff, as reported by the Wall Street Journal. "We must now face the consequences of lower revenue growth and adapt to the market environment."
Snap stock jumped 8.7% to close at 10.88, on the stock market today.
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Snap stock plunged 39% on July 22 after the company reported second-quarter earnings that missed estimates on the top and bottom lines as a weak advertising market hurt performance.
It also declined to give third-quarter guidance. Plus, Snap said it will "substantially slow our rate of hiring, as well as the rate of operating expense growth."
Spiegel said the disappointing earnings were due to slowing demand for its online ad platform.
Snap Stock: Focusing On Three Priorities
"We are restructuring our business to increase focus on our three strategic priorities: community growth, revenue growth, and augmented reality," Spiegel said in the memo to employees.
Online advertisers in a wide variety of industry groups have reported concerns related to the macro operating environment. Those worries include continued supply chain disruptions and rising input costs. In addition, they include economic concerns due to rising interest rates, and concerns related to the war in Ukraine.
Another big problem is that Apple changed the advertising tracking on its operating system. Consumers got more privacy but advertisers lost out on valuable user-tracking data. The change has cost social media stocks billions in lost revenue.
Snap stock is down 77% this year.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
