TLDR
- Snap shares dropped 15% after reporting Q2 revenue of $1.34 billion, missing Wall Street’s $1.35 billion estimate
- Global average revenue per user came in at $2.87, below the expected $2.90, indicating weaker ad monetization
- CEO Evan Spiegel blamed revenue shortfall on a botched advertising platform update, Ramadan timing, and trade policy changes
- Q3 revenue guidance of $1.475-$1.505 billion exceeded analyst expectations of $1.475 billion
- Senior VP of engineering Eric Young is departing the company to pursue new opportunities
Snap Inc. shares tumbled over 15% in after-hours trading Tuesday following the release of second-quarter earnings that failed to meet Wall Street expectations. The social media company reported revenue of $1.34 billion, falling short of the anticipated $1.35 billion.
The earnings per share loss of $0.16 matched analyst forecasts. However, the revenue miss overshadowed any positive aspects of the report.
Global daily active users reached 469 million, slightly exceeding the expected 467 million. This growth demonstrates continued user engagement with the Snapchat platform.
The real disappointment came from global average revenue per user (ARPU), which hit $2.87 versus the expected $2.90. This metric indicates how effectively Snap monetizes its user base through advertising.
ARPU performance becomes more concerning when compared to competitors. Reddit and other social media platforms have beaten ARPU estimates this earnings season.
Revenue Challenges and Platform Issues
CEO Evan Spiegel attributed the revenue shortfall to several factors in his investor letter. A problematic update to the advertising platform disrupted campaign performance and pricing.
Spiegel explained that the update caused ad campaigns to clear auctions at much lower prices than intended. The company has since reverted this change.
The timing of Ramadan also affected revenue generation during the quarter. Religious observances can impact advertising spending patterns in key markets.
Trade policy changes under President Trump’s administration created additional headwinds. Spiegel specifically mentioned “effects of the de minimis changes” as a contributing factor.
Revenue grew 9% year-over-year despite these challenges. However, this growth rate appears modest compared to industry peers.
The company posted a net loss of $262.6 million for the quarter. This represents a wider loss compared to the $248.6 million loss in the same period last year.
Leadership Changes and Future Outlook
Snap announced a major organizational restructuring of its engineering teams. The core applications team will now report to Chief Technology Officer Bobby Murphy.
The monetization engineering team will report to Chief Business Officer Ajit Mohan. This change aims to align technical resources with business objectives more directly.
Eric Young, senior vice president of engineering, is leaving the company. Young joined Snap in 2023 from Google and played a key role in platform development.
Third-quarter revenue guidance provided some relief to investors. Snap expects Q3 revenue between $1.475 billion and $1.505 billion.
This guidance exceeds Wall Street’s $1.475 billion estimate. The midpoint suggests continued growth momentum despite current challenges.
Daily active users for Q3 are projected to reach 476 million. This aligns closely with analyst expectations of 475.7 million users.
Snapchat+ subscription service continues showing strong growth with nearly 16 million subscribers. This represents a 42% year-over-year increase and drives the “Other Revenue” category.
Adjusted EBITDA for Q2 came in at $41 million, below the projected $53 million. Q3 adjusted EBITDA is expected between $110 million and $135 million, with the midpoint exceeding analyst forecasts.
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