Snap Inc. stock was falling hard on Wednesday afternoon after the Snapchat parent reported lower-than-expected third-quarter revenue. Shares fell nearly 11% in after-hours trading following the results.
Snap posted revenue of $1.72 billion, which was below analyst estimates of $1.73 billion, according to FactSet. The company also reported adjusted earnings of 3 cents per share, which was higher than the flat earnings Wall Street expected.
Snap makes most of its money from advertisers and has been implementing artificial-intelligence tools to improve the advertiser experience.
CEO Evan Spiegel said in the letter to shareholders on Wednesday that "while advertising revenue growth remains below our ambitions, advertisers are seeing the benefits of our performance improvements."
It wasn't just revenue that missed the mark. While daily active users hit 495 million in the quarter, that was lower than analyst estimates of 498.5 million.
Snap is hoping its upcoming Spec smart glasses will improve investor sentiment. But pricing may limit adoption. Specs start at $2,195 and are available for preorder, with shipping expected to begin sometime this fall. Snap's goal is to become a formidable player in the consumer AI sector using Specs and its accompanying AI-powered assistant, Specs Intelligence.
Consumers will be able to connect Specs Intelligence to their email, calendar, and other sources of personal information. The AI assistant will use that data to help streamline users day-to-day activities.
"We are excited by the positive feedback we have already received as people experience Specs firsthand," Spiegel said.
Investors aren't yet as enthusiastic about the forthcoming smart glasses. Snap stock is down 27% this year.
Specs faces stiff competition. Meta Glasses from Meta Platforms are the market leader. Although they lack a display and are functionally far more limited than Specs, Meta Glasses offer a more conventional and lighter design. Specs may offer richer features, but price and growing backlash to smart glasses from consumers and regulators alike may well mean Snap struggles to win over users.
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