An average 347 million people use Snapchat every day. That’s a fraction of the nearly 2 billion daily active users on Facebook, its biggest competitor.

But parent company Snap’s warning on the economy — coupled with its dismal results — is bringing down the market. Hopefulness about earnings season is giving way to anxiety about what comes next.

The company posted a quarterly net loss of $422 million, compared to a $152 million loss in the same quarter last year. As recession concerns grow, Snap is finding it hard to convince digital advertisers to come onboard.

Snap tests a new subscription service: Snapchat +

“They are taking this time, given all of those other macro pressures, to reevaluate their priorities to ensure that they’re making the right investments in the right places,” Jeremi Gorman, Snap’s chief business officer, said on a call with analysts. “And when we talk about digital advertising, it is the easiest thing to turn off.”

Snap said it wouldn’t provide guidance for the third quarter, citing difficulties in charting the path forward.

“Forward-looking visibility remains incredibly challenging, and it is unclear how the headwinds we observed in [the second quarter] will evolve,” it said in a letter to investors. “That said, it is clear that our rate of revenue growth has slowed considerably and we must adapt our investment strategy.”

Like other tech companies, including Google and Apple, Snap plans to slow its rate of hiring as it looks for ways to cut costs, though it also announced plans to buy back $500 million in stock.

Shares of Snap are down 30% in premarket trading. Peers that rely on digital advertising are getting dragged down, too. Facebook’s Meta is down 5% premarket, while Pinterest is off 7%. Netflix, which is building out an ad-supported version of its streaming service, is down less than 1%. The tech-heavy Nasdaq is off about 0.3%.

Lower advertising budgets are a “warning sign” for corporate expectations on consumer spending, said David Madden, a market analyst at Equiti Capital.

“If they feel demand is weak, they’ll curtail their advertising budget,” he told me.

Retail sales in the United States rose 1% in June compared to the previous month, allaying some fears that Americans would start shopping less as inflation bites. But Wall Street is worried that Snap’s results could indicate a bigger pullback is coming.

Step back: The outsize market reaction to Snap’s results sets the stage for another high-stakes period for Big Tech companies.

The stock market has had a relatively positive reaction to earnings so far. The S&P 500 is up about 2.5% over the past two weeks. But with five of the biggest companies in the index — Apple, Amazon, Microsoft, Google’s Alphabet and Meta — due to report results next week, more turbulence could be in the cards.

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