Snap Earnings Beats Big on Earnings

Sean Reid
February 7, 2018

After a trio of clunkers over the past year, Snap Inc. finally turned in an impressive quarterly earnings report Tuesday, beating expectations for revenue and user growth for the first time as a public company. On average, analysts estimated $252.95 million in revenue and a loss of 16 cents a share.

Snap (SNAP +1%) reports earnings after the close with an eye on the company's recent redesign, and whether it can show it's making up ground against Instagram.

Snap's shares soared more than 25 per cent in after-hours trading, reaching $17.61.

Snap Inc. has suffered a year's worth of disappointment from Wall Street, whose investors believe the Venice-based company isn't growing its number of users - and associated advertising revenue - fast enough.

In the year since it went public, Snap has struggled to grow.

The company expects its year-over-year revenue growth rate to "moderate" in the current quarter, compared with the fourth-quarter, Chief Financial Officer Drew Vollero said. But the company's bet on Spectacles has been expensive, costing the company $40 million last quarter for "excess inventory". Spiegel said in prepared remarks that were released alongside today's earnings that "Our business really came together towards the end of past year".

The app now has 187 million users, which still puts it far behind rivals like Instagram Stories, a Snapchat clone that now has more than 300 million daily users. Twitter's expense of $600 million in 2013 was slightly less than its revenue, while LinkedIn had just a $30 million expense and $522 million in sales in 2011, the year it debuted on the market.

To make its app more friendly to users and advertisers, Snap launched a redesigned app in November, splitting "friends" from content feeds.

During Snap's third quarter earnings call, co-founder and CEO Spiegel acknowledged that Snapchat is harder to understand than he initially realized.

More recently, Snap released a new in-app merchandise store as it continues its experiments to see what users are willing to pay for.

If you want to know how a company like Snap can lose nearly $3.5 billion in a year, look no further than stock rewards to engineers.

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