Snap plummets as much as 28% as CEO warns the economic downturn will lead to slower hiring and lower revenue growth

Snap shares fell sharply after CEO Evan Spiegel warned the company will miss its revenue targets for the current quarter. Richard Drew/Associated Press

• Snap shares fell as much as 28% in Tuesday's premarket after CEO Evan Spiegel warned of slower hiring and revenue growth.
• Snap will miss its revenue target for the current quarter, Spiegel said.
• Spiegel also told employees the social media platform will grow its headcount by just 10% this year.

Snap fell by as much as 28% in Tuesday's premarket after chief executive Evan Spiegel warned the day before the company is likely to miss its revenue targets for the current quarter.

In a memo obtained by Insider, Spiegel told Snap employees the "challenging macroeconomic environment" will likely cause both revenue and expected earnings to fall. Snap will also considerably slow its pace of hiring, with headcount expected to grow just 10% this year.

"Like many companies, we continue to face rising inflation and interest rates, supply chain shortages and labor disruptions, platform policy changes, the impact of the war in Ukraine, and more," Spiegel wrote. "We will slow our pace of hiring for unopened roles for the remainder of the year, as well as push some planned hiring into next year."

Spiegel expects Snap to hire 500 new employees this year, according to the note - a sharp decline from 2021, when Snap announced around 2,000 new hires.

Snap shares were last down 28.4% at $16.10 in pre-market trading, having finished Monday's regular session at $22.47, which marked a decline of 4% on the day.

Parts of Spiegel's letter were included in a Securities and Exchange Commission 8-K filing where Snap noted that "the macroeconomic environment has deteriorated further and faster than anticipated" in 2022.

After two years of strong growth, tech stocks have struggled this year, with rising interest rates and an economic slowdown driving the sell-off. Meta Platforms and Uber both recently announced they would reduce their 2022 hiring targets to curb costs.

"Moving forward, we will be taking steps to reprioritize our investments," Spiegel told employees. "Leaders have been asked to review spending to find additional cost savings."

Snap's sharp fall dragged down other social media companies in premarket trading, with Meta sliding 6% and Twitter dropping 4%.

"It's understandable why investors are fearful," Russ Mould, investment director at AJ Bell, said. "Snapchat's owner has sent ripples across the market for social media companies."

Futures on the tech-heavy Nasdaq 100 were down almost 2%, indicating that Monday's gains could potentially be reversed at the opening bell. 

"Investors are getting set for another twist on the rollercoaster with Monday's gains set to be largely erased after Snap interrupted the brief rally with a very downbeat snapshot," Susannah Streeter, a senior markets analyst at the UK financial services firm Hargreaves Lansdown, said.