By Sheila Dang
Snap Inc. surpassed Wall Street’s expectations for both its quarterly revenue and user growth, as the company managed to attract advertisers through improved advertising features. Furthermore, Snap announced a share repurchase program worth up to $500 million.
Initially, Snap’s shares dropped by 8% in after-market trading, but later rose by 10% to reach $12. The company, based in Santa Monica, California, generates most of its revenue from digital advertising sales and has faced challenges from larger competitors like Meta Platforms, owner of Facebook and Instagram. To enhance its competitive position, Snap invested in machine learning for better ad targeting and facilitated advertising for small- and medium-sized businesses on Snapchat.
For the fiscal third quarter ending September 30, Snap reported a 15% increase in revenue year-over-year, reaching $1.37 billion and exceeding the average analyst estimate of $1.36 billion. The company anticipates current-quarter revenue to be between $1.51 billion and $1.56 billion, with Wall Street aiming for the upper end of the range, based on Refinitiv data.
The fourth quarter, encompassing the holiday shopping season, is a critical time for brands to heavily invest in advertising their products and services. While advertising from major companies has typically bolstered Snap’s operations at the year’s end, demand from these companies has recently declined, as Snap indicated in its letter to shareholders. The introduction of two new ad formats, including one that allows promotion on the Snap Map, could potentially increase demand from large advertisers.
Snap’s CEO, Evan Spiegel, remarked during an earnings call with analysts that brands are making efforts to attract customers back to their stores and establishments, and the feedback has been positive.
During this period, Snapchat’s daily active users grew by 9% year-over-year, reaching 443 million, surpassing analyst predictions of 441 million. Last month, Snap began implementing a redesign of Snapchat to simplify the app from five sections to three. Early testing of the redesign indicated an increase in engagement among users who were not previously frequent Snapchat users, according to Spiegel.
Snap also reported adjusted earnings per share of 8 cents for the third quarter, exceeding Wall Street’s expectations of 5 cents.