Daily users fell to 188 million from 191 million in the prior quarter, which could heighten investor anxiety about how competition and privacy issues are affecting Snap and its peers.
Shares of Snap initially dropped, then jumped as high as $14.90 in extended trading following the report, after climbing less than 1 percent to $13.12 in NY.
Its revenue was $262 million in the second quarter, beating the average estimate of $250.43 million, as average revenue per user surged to $1.40 from $1.05 a year ago.
Snap had never before logged a quarterly drop in users, according to data it has released going back to 2014. After the report was released, Snap's stock price rose slightly to $13.20 from the regular session's close of $13.12. Snap lost $353 million (roughly Rs. 2,400 crores) in the quarter, or 27 cents (about Rs. 18) per share.
Snapchat's major redesign, first introduced towards the end of 2017, was also met with criticism by many users - including high-profile users such as Kylie Jenner - eventually forcing a further redesign. Analysts had expected Snap's user count to stay roughly the same in the second quarter after it rose by about 2% in the first quarter.
"We feel that we have now addressed the biggest frustrations we've heard and are eager to make more progress on the tremendous opportunity we now have to show more of the right content to the right people", CEO Evan Spiegel said of the company's subsequent attempts to walk back some of the more unpopular aspects of Snapchat's redesign.
Shares in Snap climbed more than 12 percent in after-hours trading before reversing course.
"We thought the commentary around the Android rebuild indicated that we might be waiting about a year before we can expect to see the benefit from those efforts (and in the near term, DAUs should be down again next quarter)", Mark Kelley, an analyst at Nomura Instinet, said in a note to clients Wednesday. He also chairs the Kingdom Holding Company.
Snapchat's controversial redesign has sent users running for the exits.