Just over two months ago, Snapchat maker Snap Inc. became the largest tech initial public offering since 2014, hitting the market at a valuation of more than $24 billion. So the company had a lot to prove with the release of its first earnings report today.

Unfortunately for investors, it fell well short. The messaging platform revealed sluggish user growth, an earnings miss and a stunning loss of $2.2 billion, though mostly because of stock-based compensation expenses related to the IPO.

Snap reported its quarterly revenues came in at just under $150 million, missing analysts’ expectations of $158 million. The loss came to $2.31 a share.

Investors hit the sell button quickly. Since posting its earnings earlier today, Snap’s shares have tumbled by more than 20 percent in after-hours trading. It’s not clear yet what impact Snap’s performance may have on the pace of IPOs, which has picked up so far this year, but it could make investors more wary.

“While consistent with the company’s prior guidance, [the report] nonetheless represents a surprising element of seasonality in the business, and risks of less growth ahead than we previously expected,” Pivotal Research Inc. analyst Brian Wieser wrote in a note to clients today. He reiterated his sell recommendation.

Perhaps even more troubling news for investors than the earnings numbers is the fact that Snapchat’s user base is growing more slowly than expected. According to Snap, its daily active user base has reached more than 166 million people worldwide, but some analysts were expecting between 169 and 173 million users this quarter.

One explanation for Snapchat’s slowed growth could be increased competition from the likes of Facebook Inc., which has been steadily introducing more and more Snapchat-like features to its photo and video sharing app Instagram. One such feature is Instagram Stories, which hit more than 200 million users last month.

While Snapchat’s overall user numbers may not be particularly impressive, the company noted during today’s earnings call with investors that its users are highly engaged and are spending more time on the app than ever before. Chief Executive Evan Spiegel said that this is largely thanks to Snapchat’s focus on content creation.

“One of the things I think we’ve talked about a lot is this idea that any time someone creates a snap, they typically either send it to their friend, which brings their friend into the Snapchat ecosystem, or they add it to their story, which obviously contributes to time spent as they provide that content to all their friends,” Spiegel said during the Q&A portion of the analyst conference call. “I think the most important thing to understand is that really we think of this daily active user growth as a function or a derivative of the growth in creation, so we’re really excited about the momentum there.”

In addition to Snapchat’s more engaged audience, Snap Chief Strategy Officer Imran Khan also said that Snapchat appeals to a young demographic that is hard to reach through more traditional means such as television advertising.

While user engagement and demographics are certainly useful metrics for advertisers, Noah Mallin, head of social at London-based media agency MEC Wavemaker, said user growth is still key to Snap’s long-term success.

“We now know that the reason Snapchat is talking about quality of audience, less overlap with Instagram’s users, more time spent on Snap vs. other apps, etc.: Growth is clearly flatlining,” Mallin told SiliconANGLE. “These are all good points and ones that marketers will pay attention to, but it shows they are out of the ‘Gotta get on the next big platform’ phase and into the gritty hand-to-hand-combat-with-Facebook phase. They have to find the next hook for marketers.”

Pointing to the company’s high cash burn, Mallin said the next step will be more content deals. “It’s key to getting existing users to stay and to drive new users to sample the platform,” he said.

Wieser saw some positives. “Commentary regarding new ad products, measurement capabilities and consumer features were favorable, and helped to illustrate the company’s efforts to improve on an ongoing basis,” he said.

Since posting its earnings earlier today, Snap’s shares have tumbled by more than 20 percent in after-hours trading.

Photo: Anthony Quintano Snapchat Times Square New York City Spectacles via photopin (license)