Shares in Snap, the parent company of Snapchat, fell more than 10 per cent on Wednesday after the company missed analysts' revenue and daily active user (DAU) estimates in its third-quarter earnings report, though adjusted earnings came in ahead of forecasts.
The company reported third-quarter revenue of $1.72 billion, shy of the $1.73 billion analysts expected, and daily active users of 495 million, versus the 499 million forecast. Average revenue per user (ARPU) came in at $3.48, matching expectations. Earnings per share were 3 cents. Net income was $56 million, a reversal from the $104 million net loss a year earlier. Adjusted earnings reached $383 million, above the $337 million analysts had projected.
Snap's fourth-quarter revenue is expected to land between $1.95 billion and $1.99 billion; the midpoint of that range is higher than Wall Street's estimate of $1.95 billion. The company also forecast fourth-quarter adjusted earnings of $490 million to $525 million, compared with the $498 million analysts had expected.
In an investor letter, Snap executives said the company planned for global monthly active users (MAU) to become its primary audience metric from the first quarter of 2027, and said it had 977 MAU for the quarter. “Daily engagement has historically been stable as a percentage of monthly engagement, but we do not intend to optimize Snapchat around daily use at the expense of long-term value for our community,” the letter said. The letter said a longer-term horizon better aligns reported metrics with product and safety decisions that support broader, more durable audience growth.
Snap chief commercial officer Ronan Harris told analysts during an earnings call that lower spending by unspecified consumer packaged goods (CPG) companies had impacted third-quarter sales, attributing the pullback to “macro pressures in the U.S. and also the Middle East.” He said the company was seeing very positive signs of growth from diversified verticals like financial services in the U.S., adding, “So part of our strategy here is to look outside of the pressures in CPG and find traction in these other verticals.”
Analysis
Why This Matters
- Snap’s revenue and user growth are closely watched indicators of the health of the social-media advertising market and the company’s ability to compete with larger rivals.
- The shift from daily active users to monthly active users as a primary metric signals a strategic pivot away from daily engagement optimization, which could alter how investors and advertisers measure the platform’s reach.
- Macroeconomic pressures weighing on CPG advertisers may be affecting other social platforms as well, making Snap’s performance a bellwether for the broader ad market.
Background
Snap is the parent company of Snapchat, a messaging and social media app popular among younger users. Its earnings reports are closely watched by investors as a gauge of its ability to monetise its user base against competition from Meta, TikTok and others. The company has faced slowing user growth and shifts in advertiser spending in recent quarters.
Key Perspectives
Snap executives (investor letter): The company plans to make monthly active users its primary audience metric, arguing that a longer-term horizon better aligns reported metrics with decisions that strengthen relationships and support durable audience growth.
Snap chief commercial officer Ronan Harris: Lower CPG spending due to macro pressures in the US and Middle East held back third-quarter sales, but the company is finding traction in other verticals such as financial services.
What to Watch
- Whether Snap can meet or exceed its Q4 revenue guidance, whose midpoint is above Wall Street estimates.
- The impact of adopting MAU as the primary metric on reported user growth and investor perception.
- Signs of recovery in CPG advertising spending, which Harris identified as a headwind.
Checked
12 claims in this story checked against 1 source: 12 supported.
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- SupportedSnap shares fell more than 10% on Wednesday when the company missed analysts’ third-quarter revenue and daily active user estimates.Tech: “Snap shares sank over 10% when the Snapchat parent missed on revenue and daily active users in its third-quarter earnings report Wednesday.”
- SupportedSnap’s adjusted earnings beat analysts’ estimates.Tech: “Snap's third-quarter adjusted earnings came in at $383 million, topping the $337 million that analysts were projecting, according to StreetAccount.”
- SupportedThe midpoint of Snap’s fourth-quarter revenue forecast is higher than Wall Street’s estimate.Tech: “The Snapchat parent said fourth-quarter revenue should come in between $1.95 billion and $1.99 billion. The midpoint of that figure is higher than Wall Street's estimates of $1.95 billion.”
- SupportedSnap reported third-quarter revenue of $1.72 billion, below the $1.73 billion expected.Tech: “Revenue : $1.72 billion vs. $1.73 billion expected, according to LSEG”
- SupportedSnap reported 495 million daily active users, below the 499 million expected.Tech: “daily active users : 495 million vs. 499 million expected, according to StreetAccount”
- SupportedSnap forecast fourth-quarter adjusted earnings of $490 million to $525 million, compared with analysts’ $498 million estimate.Tech: “Fourth-quarter adjusted earnings are expected to come in between $490 million and $525 million. Analysts were expecting that figure to be $498 million.”
- SupportedSnap plans to make global monthly active users its primary audience metric from the first quarter of 2027.Tech: “Snap executives said in an investor letter that the company plans for globally monthly active users to become its "primary audience metric" starting in its first quarter for 2027.”
- SupportedSnap said it had 977 MAU for the quarter.Tech: “The company also said it has 977 MAU for the quarter.”
- SupportedThe investor letter said: “Daily engagement has historically been stable as a percentage of monthly engagement, but we do not intend to optimize Snapchat around daily use at the expense of long-term value for our community.”Tech: “"Daily engagement has historically been stable as a percentage of monthly engagement, but we do not intend to optimize Snapchat around daily use at the expense of long-term value for our community," the investor letter said.”
- SupportedThe letter said a longer-term horizon better aligns reported metrics with product and safety decisions that support broader, more durable audience growth.Tech: “A longer-term horizon better aligns our reported metrics with the product and safety decisions that strengthen relationships, create lasting utility, and support broader, more durable audience growth.”
- SupportedRonan Harris attributed lower CPG spending affecting third-quarter sales to “macro pressures in the U.S. and also the Middle East.”Tech: “Harris attributed the curbed CPG spending to "macro pressures in the U.S. and also the Middle East."”
- SupportedHarris said Snap was seeing positive growth signs in U.S. financial services and quoted the strategy of seeking traction outside pressured CPG verticals.Tech: “"As we look ahead, we're seeing very positive signs of growth from diversified verticals like financial services in the U.S.," Harris said. "So part of our strategy here is to look outside of the pressures in CPG and find traction in these other verticals."”