Snap Inc. (NYSE:SNAP) shares moved lower Thursday after the company posted a quarterly profit surprise and topped revenue expectations.
Investors remain focused on rising competitive pressure in digital advertising and signs of weaker user engagement.
The company reported fourth-quarter earnings of 3 cents per share, topping expectations for a 3-cent loss. Revenue rose 10.2% year over year to $1.72 billion, beating consensus estimates of $1.70 billion.
Analyst’s Take
Citizens analyst Andrew Boone reiterated a Market Perform rating, saying Snap's advertising growth remains modest as it continues to lose share to AI-driven rivals. While ad revenue increased year over year, Boone noted it showed no sequential improvement, with platforms such as Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), Applovin Corporation (NASDAQ:APP), and TikTok capturing a growing share of ad budgets.
Boone acknowledged improving profitability and raised his 2027 EBITDA estimate, but flagged weaker engagement, including a sequential decline in North American daily active users. Global daily active users also fell sequentially and missed estimates, which he attributed to reduced community marketing spend and regulatory-driven account removals in Australia.
He said stronger AI-powered content recommendations from competitors are challenging Snap's ability to retain user attention and defend advertising share. Boone also highlighted that projected stock-based compensation for 2025 is expected to exceed EBITDA.
Elsewhere, engagement trends improved, with higher messaging activity, Snap Map usage, Spotlight interactions, and strong growth in gaming users, alongside increased adoption of generative AI lenses.
Looking ahead, Boone said Snap is testing new social features to better compete with Instagram and TikTok. He views the planned 2026 launch of Specs as a potential differentiated, mass-market AI glasses platform, though revenue from the Perplexity integration remains excluded from near-term guidance.
Boone also pointed to a newly authorized share buyback supported by balance sheet strength and improving cash flow, but said Snap shares appear fairly valued amid intensifying competition and ongoing pressure on the advertising business.
Snap Price Action: SNAP shares are trading lower by 8.80% to $5.395 at last check Thursday.
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