The number of daily users fell 2pc in Q2 2018 to 188 million, compared to 191 million in Q1 2018.
The disappointing user metric came as Snapchat faces mounting competition from Instagram. After initially shooting up more than 10 percent following the unexpected revenue beat, it then dipped to below its closing price before ticking back up slightly. He said in a statement Snap had just begun to "scratch the surface of its true potential".
The Los Angeles-area company beat Wall Street's expectations for both revenue and losses, and its share price surged by more than 13% on the news in after-hours trading to almost $15, before briefly stabilizing around $14 - an overall gain of about 6%.
The company has shifted over the a year ago to primarily selling ads through self-service, automated auctions rather than direct sales.
Tuesday also brought the surprise news of a $250 million investment in Snap by the Saudi Prince Alwaleed bin Talal.
Snap has been able to boost sales volumes by competing with bigger services on price.
Revenue aside, Snapchat's daily active user base declined for the first time. That platform, owned by Facebook, recently announced that more than 400 million people use its popular Story feature each day to post photos and videos that disappear after 24 hours. Snap is still operating at a net loss of $353 million, but it has decreased by 20 percent since this time past year.
The Los Angeles-based social network reported $262 million in revenue, beating the $250.4 million expected by analysts, and lost 14 cents per share.
In prepared remarks in a call with analysts, CEO Evan Spiegel attributed this drop-off to the app redesign: "While our Monthly Active Users continued to grow this quarter, we saw a 2 percent decline in our Daily Active Users". Both companies shed some 19 percent in market value after reporting.
Snapchat is dogged by numerous same issues it has always been: an appeal to teens and young adults but limited attributes for significant take-up beyond those age groups.
Snap executives told analysts that the redesign was the primary reason for usage slipping and that a European Union data protection law that spurred changes to user privacy terms had no material effect.