Snap Gears Up to Report Q2 Earnings: What's in Store for the Stock?

Snap SNAP is scheduled to report its second-quarter 2025 results on Aug. 5.

The Zacks Consensus Estimate for Snap’s second-quarter revenues is currently pegged at $1.34 billion, indicating an 8.03% increase from the year-ago quarter’s reported figure.

The consensus mark for earnings has been revised upward by a penny to 1 cent per share in the past 30 days, implying a 50% decrease from the year-ago quarter’s 2 cents.

SNAP surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, with an average positive surprise of 18.57%.

Snap Inc. Price and EPS Surprise

Snap Inc. price-eps-surprise | Snap Inc. Quote

Let us see how things are shaping up for the upcoming announcement.

Factors to Consider

Snap is likely to have faced pressure on the bottom line in the second quarter of 2025 as it continued investing in its ad platform and content infrastructure. Ongoing spending on AI and ML to improve personalization and engagement is expected to have pushed up infrastructure costs per user, weighing on profitability during the quarter under review.

Selective hiring in engineering and go-to-market roles, especially to support SMB clients, is also likely to have added to costs. Since a large portion of Snap’s expenses are people-related, these additions may have limited margin expansion. While full-year cost guidance was lowered by $50 million at the midpoint, its impact on second-quarter margins is expected to have been limited.

Sponsored Snaps, which began testing as a biddable ad format, are expected to have had minimal revenue impact in the quarter under review due to their early stage. Meanwhile, some advertisers reportedly pulled back spending due to changes in the de minimis exemption, contributing to top-line headwinds early in the quarter under review.

On the positive side, Snap’s Direct Response (DR) ad business is expected to have supported revenue growth. With DR making up 75% of total ad revenues in the first quarter, improvements to ad model performance and broader adoption of privacy-safe tools are likely to drive advertiser results in the quarter to be reported. The SMB segment, which helped boost active advertisers by 60% year over year in the first quarter, is also expected to have remained strong.

User growth is likely to have continued in the quarter to be reported, with daily active users (DAU) projected by the company to rise from 460 million to 468 million. The Zacks Consensus Estimate for total global DAUs is pegged at 467.95 million for the second quarter. Emerging markets are expected to have driven overall growth. With monthly active users crossing 900 million in April, Snap’s expanding global reach is expected to have supported engagement and top-line growth in the quarter under review.

What Our Model Says for SNAP

Per the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not exactly the case here.

Snap currently has an Earnings ESP of -100.00% and a Zacks Rank #2. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies worth considering, as our model shows that these have the right combination of elements to beat earnings in their upcoming releases:

Arista Networks ANET currently has an Earnings ESP of +0.96% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arista Networks shares have gained 10.4% in the year-to-date (YTD) period. Arista Networks is set to report its second-quarter 2025 results on Aug. 5.

Advanced Energy Industries AEIS currently has an Earnings ESP of +0.16% and a Zacks Rank #3.

Advanced Energy Industries shares have increased 24.5% YTD. Advanced Energy Industries is slated to report its second-quarter 2025 results on Aug. 5.

Alight ALIT has an Earnings ESP of +15.79% and a Zacks Rank #3 at present.

Alight shares have lost 22.1% YTD. Alight is scheduled to report its second-quarter 2025 results on Aug. 5.

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This article originally published on Zacks Investment Research (zacks.com).

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