Snap Inc. (SNAP) reported a surprise profit and a 14% increase in revenue for the fourth quarter, leading to a surge in its stock price late Tuesday. The company earned 1 cent per share on sales of $1.56 billion for the quarter ending in December, surpassing analysts’ expectations of a loss of 4 cents per share on sales of $1.55 billion.
Snap Inc. reports surprise profit: Revenue growth sparks stock surge
On an adjusted basis, Snap reported earnings of 16 cents per share, exceeding expectations of 14 cents, according to FactSet. In the comparable period a year earlier, Snap reported a loss of 15 cents per share on sales of $1.36 billion.
For the current quarter, Snap guided for sales of $1.34 billion, higher than the prior analyst projection of $1.33 billion. Despite this, Snap’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) forecast for Q1 came in below expectations, with a projected $57.5 million, compared to the $79 million anticipated by analysts.
Following the report, Snap’s stock jumped more than 7% to $12.52 in after-hours trading. Daily active users for Snapchat increased by 9% year over year, reaching 453 million, which was ahead of expectations of 451 million. Snap’s adjusted EBITDA for Q4 was $276 million, beating estimates of $248 million.
CEO Evan Spiegel noted in a statement that the company made significant progress in 2024 towards its core priorities, including growing its community and diversifying revenue sources while enhancing engagement. Snap’s investor letter emphasized optimism about investing for growth heading into 2025, particularly in small and medium-sized business segments.
Snap’s profit outlook for the upcoming quarter reflects its plans for investment. The company expects first-quarter adjusted earnings to range between $40 million and $75 million, which is below analyst expectations of $78.5 million. Adjusted operating expenses are projected to grow between 11% and 12% year over year due to various factors, including hiring and marketing shifts.
The company reported a net income of $9.1 million for the fourth quarter, marking a significant turnaround from a loss of $248 million in the previous year. Snap anticipates reaching 459 million daily active users in Q1, exceeding the expectations of 458.3 million. Its Snapchat+ service now has 14 million subscribers, up from 12 million in the previous quarter, contributing significantly to other revenue, which grew 131% year over year and is on track for an annualized revenue run rate of over $500 million.
Snap’s new advertising formats have attracted a broader base of small- and medium-sized marketers. The company has shifted its advertising strategy from broadly-targeted brand ads to more precise ads with direct calls to action. This strategy has started to yield results, even as Snap’s stock has seen variability, having dropped over 30% in the past year.
Snap has invested heavily in AI and machine learning technologies, incorporating services such as an AI-powered chatbot into its offerings. The company plans to spend approximately 85 cents per daily user per quarter on these technologies. Aligning with its financial strategy, Snap continues to establish partnerships to enhance its advertising capabilities, using Google’s AI infrastructure while exploring further innovations from companies like DeepSeek.
In a recent analyst call, Spiegel mentioned that the uncertain environment surrounding TikTok could benefit Snap, as advertisers and creators seek to diversify their reliance on various social media platforms. Snap’s initiatives, including new ad formats and enhanced engagement metrics, position it strategically to capitalize on evolving market dynamics. Ajit Mohan has been appointed as chief business officer, transitioning from his previous role as president of the Asia-Pacific region, further strengthening Snap’s advertising leadership.
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