Snap Surges 28%: Beats Q1 Forecasts with $1.19B Revenue, Profit

Key Takeaway

• Snap Inc.'s shares soared 28% to $14.55 after reporting an unexpected Q1 profit with earnings of 3 cents per share and revenue of $1.19 billion, beating forecasts.
• Daily active users (DAUs) grew 10% to 422 million, surpassing estimates; "Other Revenue" jumped 194%, driven by Snapchat+ subscribers.
• Snap projects Q2 revenue between $1.23 billion and $1.26 billion, with adjusted EBITDA of $15 million to $45 million, aligning with analyst expectations.

Surprising Profit and Growth

Snap Inc. experienced a significant surge in its stock value, climbing 28% to close at $14.55, marking its most substantial percentage gain since 2022. This rally comes after a challenging year where the stock had previously fallen by 14% due to a 31% drop in February. The company's first-quarter revenue saw a 21% increase to $1.19 billion from $989 million the previous year, surpassing the analysts' expectations of $1.12 billion as per LSEG. Snap reported an unexpected adjusted earnings per share of 3 cents, defying analysts' predictions of a 5-cent loss. Adjusted EBITDA stood at $46 million, significantly outperforming the anticipated $68 million loss. This financial achievement was attributed to disciplined operating expenses and accelerated revenue growth, particularly noted in the company's advertising business recovery and demand for direct-response advertising solutions. CFO Derek Andersen highlighted a robust brand environment contributing to this success across all regions in Q1.

User Growth and Revenue Streams

Snap's daily active users (DAUs) reached 422 million in the first quarter, a 10% increase year over year, exceeding the average analyst estimate of 420 million. This growth is part of Snap's broader strategy to rebuild its advertising platform after setbacks in 2022. The company's advertising revenue accounted for $1.11 billion of the total first-quarter revenue. Additionally, the "Other Revenue" category, mainly driven by Snapchat+ subscribers, saw a remarkable 194% increase year over year, reaching $87 million with more than 9 million Snapchat+ subscribers reported for the period. Despite these gains, Snap's growth rate, although the fastest since March 2022, still lagged behind Meta's 27% growth reported in its first-quarter results.

Future Outlook and Operational Adjustments

Looking ahead, Snap anticipates second-quarter revenue to be between $1.23 billion and $1.26 billion, slightly above the analysts' expectations of $1.22 billion. The company projects adjusted EBITDA for the second quarter to range from $15 million to $45 million, aligning closely with Wall Street's forecast of $15.5 million. Snap also expects DAUs to increase to around 431 million in the second quarter. In terms of operational costs, Snap plans to maintain quarterly infrastructure costs per DAU between 83 cents and 85 cents for the remainder of the year, emphasizing a strategic approach to infrastructure investment. The company also noted a significant year-over-year increase in user engagement with Spotlight and Creator Stories, with time spent on Spotlight growing by 125%.

Management Quotes

• Derek Andersen, CFO of Snap:

  "I think more broadly, we saw a much more robust brand environment, which played out in all of our regions in Q1."