Key Highlights

  • Shares fell 8.95% pre-market today to $5.39, versus Wednesday's close of $5.92.
  • Third-quarter Revenue rose 14% to $1.72 billion, narrowly missing estimates.
  • Daily active users reached 495 million, versus roughly 498 million to 499 million expected.
  • Advertising revenue grew just 4%, while other revenue rose 84%.
  • Net income swung to $56 million, with adjusted EBITDA of $383 million.

Snap (NYSE:SNAP) shares fell 8.95% in pre-market today to $5.39 after the Snapchat parent narrowly missed third-quarter revenue and daily user estimates, even as it swung to a profit. The stock closed Wednesday up 5.90% at $5.92. Snap also said it will move to monthly active users as its primary audience metric starting in the first quarter of 2027.

Brand Advertising Weakness Holds Ad Revenue Growth to 4%

Third-quarter revenue rose 14% to $1.72 billion, within guidance but slightly below estimates. Advertising revenue grew only 4% as upper-funnel Brand advertising declined on weakness in consumer packaged goods and macro pressure in the United States and Middle East. Direct response is now about 77% of revenue, with app purchase campaign revenue up over 54% and cost per purchase down about 24%.

Adjusted EPS of $0.03 missed the $0.16 estimate. Truist and B. Riley flagged reduced regional visibility.

Profit Swing and 84% Growth in Other Revenue Offset the Miss

Net income swung to $56 million, and adjusted EBITDA reached $383 million, a 22% margin. Gross Margin was 62%, and total costs grew just 1%, with about 93% of incremental revenue flowing through to adjusted EBITDA. Free Cash Flow was $164 million, up 76%, and trailing 12-month free cash flow was $777 million, up 88%.

Other revenue grew 84% as Snapchat+ subscribers passed 30 million. The community reached 495 million daily active users and 977 million monthly active users.

Specs Launch and Fourth-Quarter Guidance Set the Next Test

Fourth-quarter revenue is guided to $1.950 billion to $1.985 billion, with adjusted EBITDA of $490 million to $525 million, including planned investments in Specs. Management is cautiously optimistic about some ad acceleration in the fourth quarter and expects brand advertising to regain ground over 2027. Specs drew over 10,000 demos at a Los Angeles pop-up and are expected to begin shipping this fall.

Snap has a market Capitalization of about $10.01 billion and a 52-week range of $3.81 to $9.13. Management also flagged youth-related regulatory and Legal risks that could hurt products, costs and user growth.