The photo messaging app Snap (SNAP.N) revealed a surprising increase in quarterly revenue on Tuesday and predicted a positive current quarter as the company’s efforts to improve ad-targeting tools using AI are beginning to bear fruit.
LSEG records show revenue for the third quarter ending in September increased by 5% to $1.19 billion, above analysts’ projections of $1.11 billion.
Nevertheless, after surging as much as 14% in the wake of the results, Snap shares faltered in extended trade as several analysts questioned the company’s capacity to survive fierce competition from larger rivals like Meta (META.O).
Although the firm has resumed growing, Scott Kessler, an analyst at Third Bridge, expressed doubts about whether it can return to double-digit growth.
The Santa Monica, California-based business anticipates sales in the range of $1.32 billion to $1.38 billion for the fourth quarter. Analysts had projected $1.33 billion in revenue.
However, Snap stated that it anticipated a risk to its fourth-quarter revenues due to the possibility that the Middle East conflict might reduce spending from several brand-focused advertising programs.
More than 5 million people signed up for the social media company’s $3.99/month membership program, Snapchat+, which grants users access to premium and early-release features.
“I think what you’re seeing is the work starting to show up in the output, and the fundamental progress we’re making with the ad platform, and that’s showing up in the ARPU (average revenue per user), which is great news for the business,” Evan Spiegel, the company’s CEO, told investors.
Wall Street had anticipated 405.7 million daily active users on Snapchat, but 406 million people signed up every day. According to Thomas Monteiro, senior analyst at Investing.com, “risks remain for next year, as Snap will still need to do much better than this to regain the lost ground.”
From $360 million a year earlier to $368 million in the quarter, Snap’s net loss increased. In after-hours trading, the company’s shares closed at $9.75, slightly higher.
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