- Snap’s stock surged by an impressive 10% in late trading, following the announcement of its third-quarter revenue figures that surpassed Wall Street’s forecasts.
- The company’s revenue experienced a robust growth of 15%, reaching $1.37 billion, which comfortably exceeds the analyst expectations that were set at $1.36 billion.
- Experts attribute Snap’s notable revenue growth to the successful introduction of enhanced artificial intelligence features and a significant increase in users subscribing to Snapchat+.
Snap experienced a remarkable 10% rise in late trading hours after revealing third-quarter revenue that significantly outpaced analyst expectations. This financial achievement is credited in part to the rollout of various innovative artificial intelligence features as well as an increase in paid subscribers to the platform.
Most recognized for its engaging photo-messaging service, Snap reported a year-on-year revenue jump of 15%, totaling $1.37 billion. This figure slightly outperformed the analyst projections, which had estimated the revenue to be around $1.36 billion.
CEO Evan Spiegel highlighted that the company’s initiatives to enhance user engagement—such as AI-generated collage features and advancements in machine learning for improved personalization—are showing promising early results.
Additinally, Spiegel mentioned that Snap has been actively introducing new AI tools specifically designed for content creators, seeking to onboard a diverse array of talents onto its platform recently.
In the third quarter, Snap also saw an uptick of 11 million daily active users, marking a 9% increase compared to the same period last year. However, the company projected a modest increase in daily active users for the current quarter, estimating an additional 8 million to reach a total of 451 million users.
The metric of daily active users serves as a crucial indication of user engagement on the platform. This is particularly significant for social media companies because a larger user base generally translates to higher advertising revenue.
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The CEO pointed out that revenue growth can also be credited to the increase in paid subscriptions, which have added a steady stream of income.
Moreover, Snap has restructured its advertising approach in recent years—shifting focus from basic brand awareness campaigns to more lucrative direct response advertisements that include clear calls to action, encouraging immediate consumer engagement such as product purchases or website visits.
Despite these positive developments, the company has consistently faced significant financial challenges, reporting a substantial loss of $153 million in the latest quarter. This reflects the ongoing struggle as Snap reported a net loss of $368 million in the third quarter of 2023.
While Snap counts 443 million users, this pales in comparison to its larger competitors, such as Meta with 3.3 billion users and TikTok, which boasts over 1 billion users, both of which pose a formidable challenge for Snap in the quest for advertising revenue.
Analysts from Jefferies, including James Heaney, pointed out that the performance gap between Snap and major players like Meta and Google is consistently widening, further exacerbating Snap’s losses in market share and challenging its revenue growth. They also noted that Snap has missed analyst expectations in two of the last four quarters, contributing to a decline of over 35% in its stock year-to-date.
