Snap shares skyrocket on first earnings beat with revived user growth

Snap shares skyrocket on first earnings beat with revived user growth

It added 8.9 million daily active users, to reach 187 million, with a quarter-over-quarter growth rate of 5.05 percent percent in Q4, compared to 2.9 percent in Q3. Revenue was $285.7 million, up 72 percent year-over-year, with earnings per share of -$0.13 adjusted compared to estimates of $253 million and a -$0.16 adjusted. Snap lost $350 million compared to $440 million last quarter as operating expenses grew to $261 million, but cash burn dropped to $225 million, down 49 percent from last quarter. Ninety-seven percent of all Snaps sent on Snapchat are now created using the company’s camera. Snap is also getting more efficient, as average revenue per user grew 46 percent year-over-year to $1.53 as costs per user grew only 2 percent to $0.98. Snap Ad impressions were up 575 percent year-over-year and 90 percent quarter-over-quarter. App install ads performed especially well, showing Snapchat can deliver mobile gamers who keep playing rather than downloading and forgetting. Building Snapchat for everyone Q4 was when Snapchat finally patched the hole in the bucket, improving app performance and retention, monetizing the developing world and changing its app to attract older users. Snapchat is expected to generate $1.18 billion in U.S. ad revenue in 2018, up 83 percent over last 2017. In the meantime, Snapchat has been racing to release new features to keep users loyal despite the onslaught of competition from Facebook’s Instagram and WhatsApp.

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Snapchat is starting to turn things around, boosting its sluggish user growth rate and beating Wall Street’s expectations for the first time with today’s blockbuster Q4 2017 earnings report.

It added 8.9 million daily active users, to reach 187 million, with a quarter-over-quarter growth rate of 5.05 percent percent in Q4, compared to 2.9 percent in Q3. That translates to a DAU growth of 18 percent year-over-year, compared to Facebook’s 14 percent. Revenue was $285.7 million, up 72 percent year-over-year, with earnings per share of -$0.13 adjusted compared to estimates of $253 million and a -$0.16 adjusted.

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Snap lost $350 million compared to $440 million last quarter as operating expenses grew to $261 million, but cash burn dropped to $225 million, down 49 percent from last quarter. That brings 2017 losses to a total of $3.45 billion. Still, Snap Inc. shares closed up about 1.52 percent, to $14.06 earlier today.

In after-hours trading, shares skyrocketed 26 percent immediately following the earnings release before settling at 19 percent up. Wall Street apparently loves to see Snapchat’s growth rate recovering after a long decline since Instagram Stories launched. Snap currently has $2 billion in cash left for hiring, expenses and acquisitions.

The rocky redesign shows potential

Snapchat’s big redesign will reach all users during Q1 2018, up from 40 million users currently. It was due to be fully rolled out by now but that has been delayed following poor reception in countries like the U.K., Australia and Canada. Amongst some of the first users to review the update, 83 percent of App Store reviews were negative, citing a confusing interface, ads mixed into the message inbox via Stories and people who don’t follow you back getting pushed into the Discover section. We’ll hope to hear more about Snapchat’s big redesign in the Q&A.

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In the earnings report’s prepared remarks, Evan Spiegel acknowledges “it will take time for our 5 community to get used to the changes” from the big redesign. However, he says publisher Stories on Discover grew 40 percent compared to the old design, and core metrics are up disproportionately for users older than 35, showing the navigation simplification may be a success.

Ninety-seven percent of all Snaps sent on Snapchat are now created using the company’s camera. And each week more than half of all 13- to 34-year-olds in the U.S. play with Snapchat’s AR lenses. These stats prove Snapchat’s potential to monetize via sponsored creative tools for editing and adding augmented reality to their photos and videos. Meanwhile, Snap says it earned $100 million for its content partners in 2017.

Spiegel explained that…

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