Snap Inc. shares fell 7.1% to $5.50 in early trading on Tuesday, reversing gains from the prior session after a post-earnings rally.
The decline came despite the company reporting a 19% year-over-year increase in revenue to $1.6 billion for the second quarter, surpassing analyst expectations. Daily active users rose to 493 million, also exceeding forecasts. Net loss per share narrowed to $0.10 from $0.12 expected. The company projected third-quarter revenue between $1.70 billion and $1.74 billion.
Growth in core digital advertising remained modest, while subscription products such as Snapchat+ contributed significantly to revenue expansion. The stock had gained nearly 26% since late July but retreated toward the midpoint of its 52-week range of $3.81 to $9.28.
A legal setback overshadowed the positive results. The U.S. 9th Circuit Court of Appeals denied Snap’s appeal for broader immunity under Section 230, allowing thousands of lawsuits alleging that Snapchat’s design features contribute to youth addiction to proceed toward trial. The ruling introduces potential legal costs and liability risks.
Insider selling also weighed on sentiment. Chief Technology Officer Robert Murphy sold approximately 4 million Class A shares, while Chief Financial Officer Douglas Hott disposed of about 132,000 shares, both under pre-established trading plans.
Analysts maintained a cautious stance. Bernstein reiterated a Hold rating on August 20, with most price targets clustered between $5 and $7. The S&P 500 rose 0.1%, while the Nasdaq remained flat.
