Written by Jaspreet Singh (Reuters) – In a surprising turn of events, Snap has surpassed Wall Street’s expectations for quarterly profit, a feat attributed to enhancements made to the Snapchat parent company’s advertising platform. This achievement has caused the company’s shares to surge by 6% during after-hours trading. With social media entities and advertisers currently grappling with uncertainties surrounding a potential ban on the popular short video app TikTok in the United States, industry analysts suggest that Snap could potentially benefit from this situation.
“Amidst the prevailing environment of uncertainty related to TikTok, our business is experiencing positive effects. Advertisers are actively engaged in contingency planning and diversifying their advertising investments,” stated CEO Evan Spiegel during a post-earnings conference call. Spiegel further hinted at a possible increase in the price of Snap’s Snapchat+ subscription service to elevate the average revenue per user. Noteworthy is the revelation that the number of Snapchat+ subscribers doubled to 14 million in the fourth quarter.
The company’s strategic investments in artificial intelligence and machine learning technologies aimed at facilitating the creation of more personalized advertisements have proven to be fruitful. By concentrating on direct response ads that prompt specific actions such as app downloads or website visits over the traditional brand awareness ads, Snap has been successful in attracting small and mid-sized businesses, which emerged as the primary contributors to the company’s ad revenue growth in 2024.
Moving forward, Snap plans to introduce Sponsored Snaps—video ads that will be displayed in users’ inboxes—and Promoted Places, a feature highlighting business locations on Snap Map, in additional markets. Jasmine Enberg, a principal analyst at eMarketer, commended Snap’s dedicated efforts in enhancing its ad platform and diversifying revenue streams through subscriptions, emphasizing that these endeavors have yielded positive outcomes.
For the fourth quarter ending on December 31, Snap reported adjusted earnings per share of 16 cents, surpassing analysts’ average estimate of 14 cents, as per LSEG-compiled data. The platform witnessed a 9% increase in daily active users of Snapchat, reaching 453 million, which outperformed estimates of 450.8 million.
Looking ahead to the first quarter, Snap anticipates revenue ranging from $1.33 billion to $1.36 billion, with the mid-point slightly exceeding estimates of $1.33 billion. Furthermore, the company projects adjusted EBITDA of $40 million to $75 million for the quarter, falling below expectations of $78.1 million. Notably, revenue in the fourth quarter saw a 14% surge to $1.56 billion, marginally surpassing the average estimate of $1.55 billion.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel and Rashmi Aich)
