Snap Shares Fall More Than 10% as Revenue and User Growth Miss Forecasts Despite Higher Earnings

Snap Inc. (NYSE:SNAP) shares declined more than 10% in premarket trading on Thursday after the social media company reported third-quarter revenue and daily active users below analysts’ expectations, despite exceeding earnings forecasts and returning to net profitability.

The company also announced that it will change its primary audience reporting metric from daily active users (DAUs) to monthly active users (MAUs) beginning in the first quarter of 2027.

Snap reported adjusted earnings of $0.03 per share, compared with analysts’ expectations of $0.01. Quarterly revenue increased 14% year over year to $1.72 billion from $1.51 billion, slightly below the consensus estimate of $1.73 billion.

Net income reached $56 million, compared with a net loss of $104 million in the corresponding quarter last year.

Daily Active Users Reach 495 Million, Below Expectations

Snap reported 495 million daily active users during the third quarter, representing an increase of 3.8% from the previous year.

The figure was below the analyst consensus of 499.31 million users.

Regional performance varied, with user growth concentrated outside North America and Europe.

North American daily active users declined 6.1% to 92 million, although the result exceeded the analyst estimate of 91.92 million.

European daily active users remained unchanged at 98 million, slightly below expectations of 98.29 million.

In the rest of the world, daily active users increased 8.9% to 305 million, compared with forecasts of 309.08 million.

The rest-of-world segment accounted for most of Snap’s annual user growth, although its reported total was below expectations.

Snap to Replace Daily Active Users With Monthly Reporting Metric

Snap announced that monthly active users will become its primary audience metric starting in the first quarter of 2027.

The company said the change reflects a move towards a “longer-term horizon” for evaluating engagement and product development.

According to Snap, the revised approach is intended to align audience reporting more closely with product decisions rather than focusing on daily engagement at the expense of longer-term value.

The company acknowledged that it does not intend to optimise “around daily use at the expense of long-term value.”

The reporting change will alter how investors assess audience trends, particularly as the company moves away from daily active user figures as its principal engagement measure.

Analysts also raised questions about the potential reduction in visibility into regional user performance.

Net Income Turns Positive as Adjusted EBITDA More Than Doubles

Snap reported third-quarter adjusted EBITDA of $383 million, compared with $182 million in the same period last year.

The increase reflected an improvement in operating profitability alongside revenue growth.

Free cash flow rose 76% year over year to $164 million, up from $93 million.

The company also recorded net income of $56 million, reversing the $104 million net loss reported a year earlier.

Snap co-founder and Chief Executive Officer Evan Spiegel commented on the quarterly performance and the company’s investment priorities.

“In Q3, we generated positive net income as revenue grew 14% year-over-year to $1.72 billion, reflecting the progress we are making to build a more profitable business,” Spiegel said.

“AI is becoming a significant advantage for our teams and advertising platform, and we continue to strengthen our business while investing in our long-term vision for augmented reality with the launch of SPECS.”

The company continues to develop artificial intelligence capabilities for its advertising operations while investing in its augmented reality product strategy.

Fourth-Quarter Revenue Forecast Reaches $1.95 Billion to $1.99 Billion

For the fourth quarter, Snap projected revenue between $1.95 billion and $1.99 billion.

The midpoint of the guidance range, $1.97 billion, was slightly above the analyst consensus estimate of $1.95 billion.

Snap also forecast adjusted EBITDA of $490 million to $525 million for the period.

The guidance followed third-quarter results in which earnings and adjusted EBITDA increased, while revenue and user growth fell short of market expectations.

Investors will be monitoring whether advertising revenue growth and operating performance continue into the final quarter of the year.

Analysts Assess Earnings Performance and Reporting Changes

Analysts at B. Riley Securities described Snap’s quarterly results as mixed, pointing to the revenue shortfall alongside adjusted EBITDA that exceeded expectations.

“Snap reported a mixed 3Q, with revenue slightly below consensus, while adj. EBITDA was comfortably above expectations, benefiting from strong operating leverage,” the analysts said.

They also commented on the company’s decision to adopt monthly active users as its primary audience metric.

“We view the shift to MAU-based reporting as reasonable but note the reduced regional visibility as an incremental negative,” they added.

Truist Securities analysts similarly expressed reservations about the implications for monitoring user performance.

The change “will also reduce visibility into regional user trends,” the analysts said.

“We remain on the sidelines awaiting proof of sustainable ad growth,” they added.

The comments highlighted continued analyst attention to Snap’s advertising business and the information available to assess audience trends.

Snap Outlook

Snap’s third-quarter results showed higher revenue, positive net income and increased adjusted EBITDA, while revenue and daily active user totals remained below analyst expectations.

The company’s fourth-quarter revenue guidance had a midpoint slightly above consensus forecasts, with adjusted EBITDA expected to increase from the third-quarter level.

However, Snap’s decision to make monthly active users its primary reporting metric from early 2027 introduces a change in how its audience performance will be presented.

Investors will continue to assess advertising revenue trends, profitability and the implications of the revised user reporting framework.

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