Snap shares plunged over 10% after the social media giant reported third-quarter results that missed revenue and daily active user expectations. While adjusted earnings surpassed estimates, a slowdown in spending by consumer packaged goods (CPG) companies impacted sales. Snap provided optimistic fourth-quarter revenue guidance, suggesting a strategic pivot towards diversified verticals like financial services.
NEW YORK – Snap Inc. shares experienced a significant downturn, plummeting over 10% following the social media company's third-quarter earnings report. The Snapchat parent fell short of revenue and daily active users (DAU) expectations, signaling challenges in its advertising business.
In its third-quarter report released Wednesday, Snap posted adjusted earnings per share of $0.19, exceeding the $0.16 expected by analysts. However, revenue clocked in at $1.72 billion, narrowly missing the $1.73 billion consensus estimate. Global daily active users also came in below projections, standing at 495 million compared to the expected 499 million. Average revenue per user (ARPU) remained steady at $3.48, meeting expectations.
Despite the revenue miss, the company reported a 14% year-over-year increase in sales for the third quarter. Net income swung to a profit of $56 million, a significant improvement from the $104 million net loss recorded in the same period last year. Adjusted earnings also showed strength, reaching $383 million, surpassing the projected $337 million.
Looking ahead, Snap provided fourth-quarter revenue guidance ranging between $1.95 billion and $1.99 billion, with the midpoint of $1.97 billion surpassing Wall Street's $1.95 billion estimate. The company also anticipates fourth-quarter adjusted earnings to fall between $490 million and $525 million, aligning with or exceeding analyst expectations of $498 million.
In a notable shift, Snap executives announced plans to prioritize "monthly active users" (MAU) as its primary audience metric starting in the first quarter of 2027, a move away from its historical focus on daily engagement. The company currently reports 977 million MAU.
"Daily engagement has historically been stable as a percentage of monthly engagement, but we do not intend to optimize Snapchat around daily use at the expense of long-term value for our community," the investor letter stated. "A longer-term horizon better aligns our reported metrics with the product and safety decisions that strengthen relationships, create lasting utility, and support broader, more durable audience growth."
Snap's Chief Commercial Officer, Ronan Harris, attributed the third-quarter sales slowdown to reduced spending by consumer packaged goods (CPG) companies, citing "macro pressures in the U.S. and also the Middle East." However, Harris expressed optimism about growth in other sectors, noting positive signs from diversified verticals like financial services in the U.S. The company's strategy involves actively seeking traction in these alternative areas to offset CPG headwinds.
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