Snap Inc.’s sales in the first quarter this year were $1.36 billion. That’s up by a significant margin from $1.19 billion for the same period last year. Yet, even with this 14% year-over-year growth, the rapidly growing company got caught in its own challenges, resulting in a net loss of around $140 million. The results serve to highlight the promise of Snap’s user base and the question marks that continue to loom over the macroeconomic landscape.
Snap’s daily active user growth was impressive on both a sequential and year-over-year basis. They increased to 460 million, exceeding 453 million in the prior quarter. Part of that growth helped push the global average revenue per user (ARPU) to $2.96, just above the projected $2.93. In its third quarter earnings report, the company lost 8 cents a share. This challenges the narrative of strong profitability, despite revenues still growing like gangbusters.
Snap’s advertising revenue for the quarter was $1.21 billion, which is a 9% year over year increase. The company’s ad revenues are skyrocketing, illustrating just how effectively Instagram has begun to cash in on its exploding user base. With 900 million monthly active users, the opportunities for growth are gargantuan. Most importantly, Snap brought in $1.44 billion in revenue, beating analyst projections of $1.35 billion and proving it can still make money even under mounting economic duress.
Snap’s leadership acknowledged these challenges in a letter to investors, stating, “While our topline revenue has continued to grow, we have experienced headwinds to start the current quarter, and we believe it is prudent to continue to balance our level of investment with realized revenue growth.”
We are glad to see Snap has moved to protect their economic reality. They’ve raised their full-year adjusted operating expenses range to between $2.65 billion and $2.70 billion, down from their prior forecast of $2.70 billion to $2.75 billion. At its core, this decision is a manifestation of the company’s continued focus on more efficient cost management amid an uncertain economic environment.
“These charges are not reflective of underlying trends in our business,” stated Snap in its official communication. This statement is intended to calm any investor jitters by clarifying that underneath all the short-term red, the company’s fundamentals are still looking strong.
As Snap tries to stay afloat in the ever-changing market landscape, it’s moving its core focus to user engagement and monetization. The company’s performance in the coming quarters will be closely watched as it seeks to maintain momentum amidst ongoing economic headwinds.