Shares in Snap Inc. plunged in late trading after the company predicted a revenue decline of up to 10% in the first quarter of 2023.

For the fourth quarter that ended Dec. 31, Snap reported earnings per share before costs such as stock compensation of 14 cents, up from a penny a share in the same quarter of last year. Revenue edged up to $1.3 billion from $1.298 million a year ago. Analysts had expected earnings per share of 11 cents on revenue of $1.31 billion.

Snap’s net loss in the quarter was $288 million, including restructuring charges of $34 million, compared with a net income of $23 million in the prior year. Adjusted earnings before interest, taxes, depreciation and amortization came in at $233 million, down from $327 million a year ago.

Daily active users in the quarter hit 375 million, up 56 million or 17% year-over-year, and the average revenue per user was $3.47. Both were small misses, with analysts having expected 375.3 million daily active users and revenue per user of $3.49.

Highlights in the quarter included paying subscribers to Snapchat+, the company’s paid subscription service, passing 2 million. Snapchat+ offers exclusive and experimental features, allowing subscribers access to new features such as Custom Story Expiration and Custom Notification Sounds in the fourth quarter.

Time spent watching Snapchat’s Spotlight content grew over 100% year-over-year. Seventeen content partners reached more than 50 million viewers each in the quarter.

“We ended a challenging 2022 with 375 million Daily Active Users, 12% year-over-year annual revenue growth and positive full-year free cash flow,” Snapchat Chief Executive Officer Evan Spiegel said in a statement. “We continue to face significant headwinds as we look to accelerate revenue growth and we are making progress driving improved return on investment for advertisers and innovating to deepen the engagement of our community.”

Snap once again declined to give a formal outlook, citing “uncertainties related to the operating environment,” but that didn’t stop the company from sharing an informal outlook in a letter to investors.

Snap said that it expected to deliver strong growth in the first quarter of 2023, with daily active users expected to come in at between 382 million and 384 million. The letter then takes a turn, warning that “on the monetization side, we anticipate that the operating environment will remain challenging, as we expect the headwinds we have faced over the past year to persist throughout Q1.”

“Our internal forecast assumes revenue will be between -10% to -2% year-over-year in Q1,” the letter reads, adding that “we believe we have a path to adjusted EBITDA breakeven in Q1.”

A potential 10% drop in revenue is not a prediction, informal or otherwise, that investors like to hear, and Snap shares fell 14% in late trading.

Image: Snapchat