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Social network Snapchat (NYSE: SNAP) missed analysts' expectations in Q2 CY2024, with revenue up 15.8% year on year to $1.24 billion. On the other hand, the company expects next quarter's revenue to be around $1.36 billion, in line with analysts' estimates. It made a non-GAAP profit of $0.02 per share, improving from its loss of $0.21 per share in the same quarter last year.
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Snap (NYSE:SNAP) Q2 CY2024 Highlights:
- Revenue: $1.24 billion vs analyst estimates of $1.25 billion (1.1% miss)
- EPS (non-GAAP): $0.02 vs analyst expectations of $0.02 (2.2% miss)
- Revenue Guidance for Q3 CY2024 is $1.36 billion at the midpoint, roughly in line with what analysts were expecting
- Adj EBITDA Guidance for Q3 CY2024 is $85 million at the midpoint vs analyst estimates of $109.9 million (22.7% miss)
- Gross Margin (GAAP): 52.4%, down from 53.5% in the same quarter last year
- Free Cash Flow was -$73.44 million, down from $37.9 million in the previous quarter
- Daily Active Users: 432 million, up 35 million year on year
- Market Capitalization: $21.95 billion
Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.
Social NetworkingBusinesses must meet their customers where they are, which over the past decade has come to mean on social networks. In 2020, users spent over 2.5 hours a day on social networks, a figure that has increased every year since measurement began. As a result, businesses continue to shift their advertising and marketing dollars online.
Sales GrowthSnap's revenue growth over the last three years has been mediocre, averaging 16.1% annually. This quarter, Snap reported 15.8% year-on-year revenue growth, falling short of analysts' expectations.
Guidance for the next quarter indicates Snap is expecting revenue to grow 14% year on year to $1.36 billion, improving from the 5.3% year-on-year increase it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 14.5% over the next 12 months.
Usage Growth As a social network, Snap generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.
Over the last two years, Snap's daily active users, a key performance metric for the company, grew 13.4% annually to 432 million. This is solid growth for a consumer internet company.
In Q2, Snap added 35 million daily active users, translating into 8.8% year-on-year growth.
Revenue Per UserAverage revenue per user (ARPU) is a critical metric to track for consumer internet businesses like Snap because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Snap's audience and its ad-targeting capabilities.
Snap's ARPU has declined over the last two years, averaging 7%. Although the company's users have continued to grow, it's lost its pricing power and will have to make improvements soon. This quarter, ARPU grew 6.5% year on year to $2.86 per user.
Key Takeaways from Snap's Q2 Results It was good to see Snap increase its number of users this quarter. On the other hand, its revenue unfortunately missed analysts' expectations and its revenue guidance for next quarter came in slightly below Wall Street's estimates. Adding to the negativity was the fact that adjusted EBITDA guidance for next quarter was significantly below. Overall, this quarter could have been better. The stock traded down 21.4% to $10.07 immediately following the results.
