Snap Inc.’s daily user growth missed analyst expectations even as the company posted a profitable quarter and strong revenue gains.
- Snap reported 495 million daily active users (DAUs) for the period ending September 30, missing the 499 million Wall Street analysts expected.
- Revenue rose 14% year-over-year to $1.72 billion, matching average consensus estimates, while net income swung to a positive $56 million.
- The Snapchat maker projected fourth-quarter sales between $1.95 billion and $1.99 billion, slightly outpacing analyst expectations.
Snap Inc. (SNAP) share price tumbled 11% after-hours on Wednesday after the company’s dwindling user growth offset optimism around improved financial cost structures and a better-than-expected Q4 outlook.
In the quarter ending September, total revenue increased 14% year-over-year to $1.72 billion, aligning with Wall Street estimates. Chief Financial Officer Doug Hott noted that the total cost structure grew by just 1% over the same period. Snap reported 495 million daily active users (DAUs) for the period ending September 30, falling short of the 499 million anticipated by Wall Street analysts.
The company generated net income of $56 million, a substantial recovery from a net loss of $104 million in the same period last year, while operating cash flow rose 44% to $210 million and free cash flow increased 76% to $164 million, an opposing situation compared to other social media firms focused on AI.
Executive Remarks And Strategic Priorities
Reflecting on the quarter, Co-Founder and Chief Executive Officer Evan Spiegel emphasized the company’s financial progress while addressing its core hurdles.
“AI is becoming a meaningful advantage for Snap, helping us improve our products faster, serve our community more effectively, and work more efficiently,” Spiegel said in his prepared remarks.
“While advertising revenue growth remains below our ambitions, advertisers are seeing the benefits of our performance improvements. Our focus now is to turn these improvements into broader adoption, more meaningful share of advertiser budgets, and more durable growth.”
Chief Commercial Officer Ronan Harris said direct response advertising grew robustly due to improved purchase outcomes, though upper-funnel brand advertising declined year over year.
Meanwhile, Chief Financial Officer Doug Hott outlined the company’s upcoming metric transitions, noting that beginning in the first quarter of 2027, global monthly active users (MAUs) and MAU-based revenue per user will become primary metrics.
Product Innovation And Regulatory Pressures
Snap continues to bet heavily on artificial intelligence and hardware to drive future expansion. The company is taking orders for its $2,195 AI-powered augmented reality glasses, known as Specs, with shipments slated to begin later this year. Furthermore, paid subscriptions crossed the 30 million mark across Snapchat+, Memories Storage, and Lens+.
The platform also faces mounting headwinds, including legal scrutiny and international discussions regarding social media restrictions for teenagers. Snap warned investors that these regulatory challenges could introduce significant shifts to its product designs and operational workflows.
“We continue to monitor the evolving legal and regulatory landscape in the United States and internationally that could materially impact our business and financial results, including increased regulatory scrutiny on youth-related issues,” Hott added.
“While outcomes remain uncertain, they may result in significant changes to our products and business practices, increased compliance requirements and legal costs, increased payments for legal judgments and settlements, and negative impacts to user growth and engagement.”
SNAP Stock: Retail View
Retail sentiment on Stocktwits was ‘bullish’ with ‘high’ message volumes.
A user was particularly bullish on the results and highlighted that the “panic sell” was for “nothing.”
View this Stocktwits post
SNAP stock has lost around 24% year-to-date.
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