Snap (SNAP) shares rose early Tuesday after the social media company reported better-than-expected second-quarter results amid growth in advertising revenue.
The Snapchat parent posted a net loss of $0.10 a share for the quarter ended June, narrowing from a $0.16 loss the year before, it said late Monday. The consensus on FactSet was for a per-share GAAP loss of $0.12. Revenue jumped 19% to nearly $1.6 billion, topping the Street's view for $1.54 billion.
Advertising revenue increased 9% to $1.28 billion in the second quarter, reflecting progress with large advertisers in North America and a broad adoption of the company's artificial intelligence-powered smart campaign solutions offering, among other factors, Chief Financial Officer Doug Hott said in prepared remarks. Other revenue surged 85% to $316 million.
"After several quarters of improving our ad products and go-to-market approach, we saw better momentum with large advertisers in North America and stronger revenue growth internationally," Chief Executive Evan Spiegel said. "(FIFA) World Cup-related spending contributed during the quarter, alongside continued strength among small and medium-sized businesses."
The stock spiked 7.3% in the most recent premarket activity.
For the third quarter, the company anticipates revenue to come in between $1.7 billion and $1.74 billion, Hott said. The average analyst estimate is for $1.72 billion.
In a client note emailed Tuesday, RBC Capital Markets said the guidance likely reflects a "normalization" of World Cup-related advertising spending and tougher year-over-year comparisons after easier comparisons in the second quarter of 2025.
"We're encouraged at the anecdotal progress on (advertising) performance and believe the subscription business is somewhat underappreciated but need to see follow through on model-driven performance improvements flowing through to the broader business before we can get more constructive," analyst Brad Erickson said in the note.
Second-quarter daily active users grew 5% year over year to 493 million, ahead of the average analyst estimate of 487.5 million. Average revenue per user advanced 13% to $3.25, ahead of the market's forecast of $3.16.
Last week, Meta Platforms (META) reported an unexpected year-over-year decline in its quarterly earnings. Daily active users for Meta's family of apps, including Facebook, Instagram and WhatsApp, increased 3% on a yearly basis to 3.6 billion on average for June, the company said at the time.
Snap projects infrastructure costs to rise "modestly" year over year in the current quarter and sees the metric coming in at $1.65 billion to $1.7 billion for the 2026 full year, up from its previous guidance of $1.6 billion to $1.65 billion, Hott said Monday. "The increase primarily reflects additional investment in the AI and machine learning infrastructure needed to support revenue growth," the CFO added.
"Looking beyond 2026, we believe the stronger near-term outlook reflects durable improvements in the business," according to Hott. "We expect direct revenue to continue growing materially faster than the overall business."
