The company posted a net loss of $443.2 million.
Snap also wrote down $39.9 million as a result of losses from unsold Spectacles, the company's first foray into hardware. It said the charges were a result of excess inventory and inventory purchase commitment cancellations.
Though average revenue per user was up 39 percent compared to this quarter last year, it failed to reach Wall Street's estimates.
The company also only added 4.5 million new users, with CEO Evan Spiegel admitting it grew its DAUs "at a lower rate than we would have liked" in prepared remarks. The lower rate could be partially because it averaged the entire quarter, and July and August were more lackluster than September Spiegel added.
The company is losing market share to rival Instagram, especially since the launch of feature Stories in 2016. However some ad technology platforms said there's been increased company interest in Snap especially because its user base is different from Instagram and it has other types of ads, including better location-based targeting and augmented reality features.
Disclosure: CNBC parent NBCUniversal is an investor in Snap.
Correction: The write-down of unsold inventory affects earnings.