Snap (SNAP) announced its Q3 earnings on Tuesday, surpassing expectations and indicating potential growth for the social messaging company in the future.
In after-hours trading, Snap shares surged by at least 11%.
These earnings beats were a much-needed victory for Snap, as the company had been struggling due to the launch of Apple’s App Transparency Tracking and a digital advertising slowdown that has only recently started to recover.
While Snap has plans for its future, such as mainstream AR glasses, they have yet to fully materialize. Furthermore, the rollout of their AI chatbot, My AI, has raised concerns among parents about their children’s safety.
In their earnings release, Snap revealed that over 200 million people have used My AI, with more than 20 billion messages sent. They have also gained 5 million users for their premium subscription Snapchat+, potentially generating over $200 million in annual income.
“We are focused on improving our advertising platform to drive higher return on investment for our advertising partners, and we have evolved our go-to-market efforts to better serve our partners and drive customer success,” said Snap CEO Evan Spiegel.
Additionally, Snap provided a relatively optimistic internal forecast, projecting Q4 adjusted EBITDA between $65 million and $105 million, exceeding Wall Street’s estimate of $100.6 million.
The earnings rundown
Here are the key numbers reported by Snap compared to Wall Street’s expectations:
Adjusted Earnings Per Share: $0.02 actual versus $0.04 expected
Revenue: $1.19 billion actual versus $1.11 billion expected
Global Daily Active Users (DAUs): 406 million actual versus 405.79 million expected
Snap’s daily active user numbers indicate a 12% year-over-year growth.
In its report, Snap announced that COO Jerry Hunter is set to retire. The company also authorized a share buyback program of up to $500 million, implying that the company’s stock is undervalued.
Despite the revenue upswing and signs of advertising market recovery, Snap acknowledged the challenging nature of the third quarter. Additionally, there are concerns of another advertising downturn due to the conflict in Israel.
“Our business continued to face significant headwinds in the third quarter,” stated the letter released with the earnings. “We believe that we can be successful in this new operating environment – with elevated inflation, increasing interest rates, and heightened geopolitical tensions – by rigorously prioritizing our investments.”
Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on X, formerly Twitter, at @agarfinks and on LinkedIn.
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