Snap shares soared 28% on Friday after the social media company reported a surprise profit and exceeded Wall Street estimates for revenue and user numbers in its first quarter results. The stock closed at $14.55, marking its largest single-day percentage gain since October 2022, although it is still down by around 14% so far this year following a 31% fall in February.
Revenue for the period increased by 21%, reaching $1.19bn from $989m at the same stage last year to top analyst predictions of sales of just under $1.12bn, according to data provider LSEG. The company also reported adjusted earnings per share (EPS) of three cents compared with expectations for a five-cent loss. Adjusted EBITDA was $46m against forecasts for an expected shortfall of nearly $70m.
Snap said that its adjusted EBITDA figure had outstripped company targets because of more careful control over costs as well as rapid increases in revenues, while revenue growth during the quarter primarily came from improvements to its advertising platform and increased demand for direct-response ads. “I think we saw a much more robust brand environment which played out across all our regions,” CFO Derek Andersen said on an earnings call.
Snap’s user base also grew faster than expected, with the company reporting 422m daily active users (DAUs) during Q1 – up by nearly ten per cent year-on-year and ahead of average analyst forecasts of just under 420m as collated by StreetAccount. The strong numbers followed an announcement made in February that Snap was laying off around half a thousand employees, equivalent to approximately 10% of its global workforce.
Snap’s advertising revenues reached $1.11bn during the period whilst non-advertising sources (reported as part of an ‘other revenue’ category) came in at $87m – representing a near-doubling compared with the same stage last year, thanks largely to increased subscriber numbers for Snapchat+ which reached more than 9 million during Q1.
Despite this growth being its fastest since March of last year, it still fell short when measured against Facebook parent Meta’s better-than-expected first quarter results announced on Wednesday – although shares in the latter company plunged following a less optimistic forecast and comments about long term investments from CEO Mark Zuckerberg.
Snap is predicting revenue for Q2 to be between $1.23bn to $1.26bn compared with expected street level sales figures of $1.22bn, according to StreetAccount data.
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