Tech Transformers

Snap sold fewer than 42,000 Spectacles in the second quarter

Key Points
  • Snap Inc's "other revenues", which is mainly made up of its video recording sunglasses Spectacles, were $5.4 million in the second quarter.
  • This was down from $8.3 million in the first quarter.
  • Spectacles cost $130 so $5.4 million in revenues assumes around 41,500 pairs were sold in the second quarter.
A woman wears Snapchat's Spectacles on the floor of the New York Stock Exchange during the company's initial public offering in New York, March 2, 2017.
Brendan McDermid | Reuters

Revenues from Snap Inc's video recording sunglasses Spectacles fell in the second quarter, adding to the disappointment felt by investors after it reported revenues and user growth that missed expectations.

On the earnings call for the June quarter, Snap's Chief Financial Officer Drew Vollero said: "other revenues were $5.4 million, substantially all of which was driven by Spectacles."

If we assume that all of this came from Spectacles sales, which cost $130, then around 41,500 pairs were sold in the second quarter.

"Other revenues" fell nearly 35 percent from the $8.3 million reported in the first quarter, which would assume around 61,800 pairs of Spectacles sold.

Snap executives only mentioned Spectacles once on the call with investors more focused on the worse than expected results. Revenue came in at $181.7 million and though that's up 153 percent year-on-year, it missed analyst expectations of $186.2 million.

Snap has a lot of challenges ahead: Analyst
Snap has a lot of challenges ahead: Analyst

Meanwhile, daily active users (DAUs) grew to 173 million but missed expectations as well.

Snap is facing stiffer competition than ever thanks to copycat products in the form of Facebook-owned Instagram Stories. Snap has often talked about itself as a "camera company" with hardware seen as a key differentiator for the company.

Earlier this month, TechCrunch reported that Snap was close to acquiring Chinese drone maker Zero Zero Robotics for between $150 million to $200 million.

But where Facebook has created a rival to Snap's core product, the social networking giant could also be preparing its own hardware too, which would add further pressure. Facebook CEO Mark Zuckerberg recently said the company is working on some sort of glasses or headset product.

For now, though, analysts said that Snap really should be focusing on building its core user base, and leave hardware to the side.

"My view is that research and development should be completely focused on platform offering and software services," Neil Campling, head of technology, media, and telecoms research at Northern Trust Capital Markets, told CNBC by email.

"This company lacks scale in terms of users and hardware provides no clear linkage to improving the problems of scale or of increasing DAU growth. Facebook will likely continue to pressure Snap's core offering and it is difficult to see how Snap can differentiate in our view."