UPDATED 20:03 EDT / OCTOBER 22 2019

APPS

Snap returns to form with solid user growth and lower losses but shares fall

Snap Inc. beat expectations across the board in its third-quarter financials today as the chat app maker saw a return to form.

For the quarter ended Sept. 30, Snap reported revenue of $446 million, up 50% from a year ago and ahead of analysts’ average prediction of $435.1 million.

Snap, infamous as saying that it may never make a profit before going public, came far closer to doing so than it ever has previously, reporting a loss of $227 million or 4 cents per share, a 30% improvement from a year ago. Average revenue per user came in at $2.12.

Snap’s increasing revenue came amid increasing user numbers, with the company reporting 210 million global daily active users in the quarter, up from 203 million in the second quarter and 186 million in the same quarter of 2018.

“We delivered strong results this quarter and we are pleased that the investments we have made are continuing to drive the growth of our community and our business,” Snap Chief Executive Officer Evan Spiegel said in a statement. “We are a high-growth business, with strong operating leverage, a clear path to profitability, a distinct vision for the future and the ability to invest over the long term. We are excited about executing on the many opportunities in front of us.”

The turnaround in Snap’s fortunes in both losses and user numbers is notable. Spiegel, in an internal memo in September 2018, said he wanted Snap to be profitable in 2019.

Still, enthusiasm was dampened by forward estimates. Snap predicted that revenue in the fourth quarter would come in at $540 million to $560 million versus an analyst average prediction of $555.4 million. The lower-than-expected figure stems from there being one fewer full week between Black Friday and the end of the holiday shopping season, a peak demand time for the company.

“The way the calendar falls this year there’s one fewer week of activity between those two holidays,” Chief Financial Officer Derek Andersen told analysts. “That’s a potential headwind for us, and the guide reflects that.”

The reasoning behind the forward estimates didn’t convince investors, however, with Snap’s share price dropping 3% in after-hours trading.

Photo: Pixabay

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