Prime Highlight:
- Snap reported stronger-than-expected fourth-quarter results, driven by improved advertising demand and a sharp rise in profitability, sending shares higher in after-hours trading.
- The company announced a $500 million stock buyback and highlighted growth in subscription services, signaling confidence in its long-term strategy.
Key Facts:
- Fourth-quarter revenue reached $1.72 billion, above estimates of $1.70 billion, while net income rose to $45.2 million from $9.1 million a year earlier.
- Global daily active users declined to 474 million, down 3 million quarter over quarter, partly due to lower marketing spend and regulatory-driven account removals in Australia.
Background
Snap shares rose more than 2% in after-hours trading on Wednesday after the parent company of Snapchat reported fourth-quarter earnings that beat revenue expectations and showed a sharp rise in profit.
The company posted revenue of $1.72 billion for the quarter, slightly higher than Wall Street estimates of $1.70 billion, according to LSEG. Sales grew 10% from a year earlier, supported by stronger advertising demand and higher average revenue per user. The company’s net income rose to $45.2 million, almost four times higher than the $9.1 million it reported in the same period last year.
Snap also announced a $500 million stock buyback, showing confidence in its financial strength. Adjusted earnings before interest, taxes, depreciation and amortization rose to $358 million, beating market expectations of about $300 million.
Despite the strong quarterly results, Snap’s outlook for the first quarter came in below estimates. The company said it expects revenue between $1.50 billion and $1.53 billion, compared with analyst forecasts of $1.55 billion. However, projected adjusted EBITDA for the first quarter is expected to range between $170 million and $190 million, with the midpoint slightly above market estimates.
User growth showed some pressure during the quarter. Global daily active users stood at 474 million, down by 3 million from the previous quarter. The company said the decline was linked to reduced marketing spending aimed at improving profitability and the removal of about 400,000 accounts in Australia following new age verification rules.
In North America, daily active users fell short of expectations at 94 million. Snap said regulatory challenges remain a concern but added that advertising revenue from users under 18 is not a major part of its business. Looking ahead, Snap plans to expand its subscription services, including Snapchat+ and Memories Storage Plans. Subscriber numbers rose 71% year over year to 24 million. The company is also preparing for the launch of its augmented reality glasses, Specs, expected in 2026.