Earnings

Snap Posts $56 Million Quarterly Profit, But Ad Revenue Grew Only 4%

Revenue rose 14% to $1,722 million as Other Revenue grew 84%, while the CEO said ad growth "remains below our ambitions."

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

— 2 min read
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Snap Posts $56 Million Quarterly Profit, But Ad Revenue Grew Only 4%

Snap, the parent of Snapchat, earned $56 million in the third quarter, against a net loss of $104 million a year earlier, on revenue that rose 14% to $1,722 million. The company's advertising business, its core, grew just 4%, and CEO Evan Spiegel said ad growth "remains below our ambitions."

Subscriptions carry the growth

Chief Financial Officer Doug Hott said in prepared remarks that advertising revenue grew 4% while Other Revenue grew 84%, led by Snapchat+, Memories Storage and Lens+. Spiegel said Snap passed 30 million paid subscribers across those products, which he described as still a small share of its monthly community.

Chief Commercial Officer Ronan Harris said direct response advertising grew strongly, but upper-funnel brand advertising fell year over year and weighed on overall growth.

Snap makes Snapchat, the camera-first messaging app, and sells ads, subscriptions and storage plans, along with Spectacles, wearable AR glasses for developers.

Profit margins widen sharply

Adjusted EBITDA, a profit measure that excludes items such as stock pay, rose to $383 million from $182 million. Hott said about 93% of incremental revenue flowed through to it, for a margin of 22%.

Operating cash flow rose 44% to $210 million and free cash flow rose 76% to $164 million. Hott said total costs grew just 1%. For the first nine months, Snap still reports a net loss of $196 million, after $128.5 million of restructuring charges. Full-time headcount was 4,540, down 13% from a year earlier.

Snap ended the quarter with about $2.77 billion in cash, cash equivalents and marketable securities.

Fourth-quarter outlook and a new yardstick

For the fourth quarter, Snap guided to revenue of $1.950 billion to $1.985 billion and Adjusted EBITDA of $490 million to $525 million, a range that includes planned investment in its SPECS glasses.

Snap expects to finish its current share repurchase program in the fourth quarter, then pursue a multi-year approach to offset dilution and hold the fully diluted share count stable in 2027.

Starting with first-quarter 2027 results, global monthly active users will replace daily active users as the primary audience metric. Monthly users reached 977 million in the third quarter, up 4%, and daily users 495 million.

Snap hosts its earnings call at 5:00 p.m. Eastern on Wednesday to discuss the fourth-quarter outlook.

Sources

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