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Social network Snapchat (NYSE: SNAP) reported Q1 CY2025 results topping the market’s revenue expectations , with sales up 14.1% year on year to $1.36 billion. Its non-GAAP profit of $0.07 per share was significantly above analysts’ consensus estimates.
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Snap (SNAP) Q1 CY2025 Highlights:
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Revenue: $1.36 billion vs analyst estimates of $1.35 billion (14.1% year-on-year growth, 1.3% beat)
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Adjusted EPS: $0.07 vs analyst estimates of $0.04 (significant beat)
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Adjusted EBITDA: $108.4 million vs analyst estimates of $64.77 million (8% margin, 67.4% beat)
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Operating Margin: -14.2%, up from -27.9% in the same quarter last year
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Free Cash Flow Margin: 8.4%, down from 11.7% in the previous quarter
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Daily Active Users: 460 million, up 38 million year on year
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Market Capitalization: $15.39 billion
StockStory’s Take
Snap’s first quarter results reflected ongoing progress in its direct response advertising business and steady momentum from subscription products like Snapchat+. Management attributed revenue growth to improvements in advertising platform automation, expanding small and medium-sized business (SMB) advertiser participation, and increased time spent on content. CEO Evan Spiegel emphasized enhancements to the visual communication core of Snapchat, highlighting the rollout of new features in messaging and augmented reality (AR), as well as the refinement of the app experience for both new and long-time users.
Looking ahead, management stated that macroeconomic uncertainty is making forecasting more difficult, with CFO Derek Andersen noting, "the macro is changing quickly, and the path forward isn’t entirely clear." Expense discipline and targeted investments in AI and machine learning remain top priorities. The leadership team expects improvements in ad platform efficiency and continued user engagement to support positive free cash flow and progress toward GAAP profitability, but cautioned that near-term growth could be affected by external factors such as changes to trade exemptions and advertiser sentiment.
Key Insights from Management’s Remarks
Snap’s management focused on the combination of product innovation and disciplined execution that shaped first quarter performance and set priorities for the remainder of the year.
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Direct Response Advertising Expansion: Snap’s direct response (DR) ad business saw notable growth, with DR now contributing 75% of total advertising revenue for the first time. Management credited ongoing machine learning upgrades and broader adoption of goal-based bidding (an approach where ads are optimized for specific outcomes) as key drivers.
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SMB Advertiser Growth: The company reported a 60% increase in active advertisers year-over-year, led by small and medium-sized businesses. Initiatives like Snap Promote lowered barriers for these advertisers, while ongoing efforts target greater participation from mid-sized customers to drive future revenue.
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Subscription Revenue Momentum: Snapchat+ subscriptions reached nearly 15 million, up 59% from the prior year. Management highlighted that this expansion diversifies revenue streams and reduces reliance on advertising, contributing to overall business resilience.
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Product and Experience Improvements: The team made changes to the app’s interface, introducing a refined five-tab layout and features that encourage creative expression and easier content discovery. These adjustments were informed by user feedback and are designed to boost engagement, particularly among newer or more casual users.
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Augmented Reality and AI Integration: Snap continued investing in AR with new features for its Spectacles smart glasses and AR developer platform, including global positioning and advanced hand tracking. The company also expanded use of AI tools like My AI, which saw a 55% increase in daily active users in the U.S., and implemented faster, more responsive machine learning models for content personalization.