Snap Inc. reported its slowest quarterly sales growth ever, saying that a decline in advertising spending continues to drag on results. Shares plunged more than 20 per cent  in late trading.

The maker of the Snapchat app said third-quarter sales increased 6 per cent  to US$1.13 billion. That was just shy of analysts’ average estimate of US$1.14 billion, according to projections compiled by Bloomberg. 

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The social media company spent the quarter shrinking and refocusing its business, announcing in August that it was cutting 20 per cent  of its workforce and slashing projects that don’t contribute to ​​user or revenue growth, or to the company’s augmented reality efforts. The changes were in response to plunging sales, which Snap attributed to a slowdown in marketer spending.

Revenue growth “continues to be impacted by a number of factors we have noted throughout the past year, including platform policy changes, macroeconomic headwinds, and increased competition,” Snap said in its prepared remarks for investors. “We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures, and rising costs of capital.”

Snap, which closed at US$10.79 per share, has fallen 77 per cent  this year.

The Snapchat app, popular with young people for sending disappearing messages and augmenting videos with special effects, reported a total of 363 million daily active users in the quarter, up 57 million from a year earlier. That topped the 358.7 million estimate. Still, Snap’s average revenue per user slid 11 per cent  to US$3.11, missing the US$3.19 average analyst projection.

The company is prioritizing efforts that can boost revenue. In the third quarter, Snap grew its nascent subscription service, Snapchat+, to 1.5 million users who pay for early access to exclusive or pre-release features, Snap said Thursday. The app maker has also been investing in improving measurement tools for ads on its platform.

Snap posted a net loss of US$360 million in the quarter, or 22 cents per share. The loss includes US$155 million in restructuring costs. The board also authorized a US$500 million share repurchase plan for its Class A stock over the next 12 months, Snap said.

Investors will be watching Santa Monica, California-based Snap for clues on the performance of other advertising-dependent social media businesses. Next week, Meta Platforms Inc. and Alphabet Inc. report earnings.

Snap and platforms like Meta’s Facebook and Alphabet’s Google are competing for a shrinking pool of advertising dollars this year. Spiraling inflation is putting pressure on companies and consumer spending. Meanwhile, new rules from Apple Inc. that require all apps to get smartphone users’ permission to be tracked online have made it more difficult for advertisers to measure and manage their ad campaigns.

Shares of Meta, Alphabet and Pinterest Inc., another advertising reliant site, all fell in after-market trading following Snap’s report.