Snapchat's second quarter saw management attribute performance to an expanding user base and new product features, but the market reacted negatively to execution issues in advertising. CEO Evan Spiegel noted that Sponsored Snaps and ongoing investments in augmented reality contributed to user engagement. However, CFO Derek Andersen acknowledged an ad platform change that resulted in some campaigns clearing at reduced prices, impacting advertising revenue growth. Management also cited the timing of Ramadan as an external headwind. While the company made progress on strategic priorities, the quarter was marked by operational missteps and adjustments.
Is now the time to buy SNAP? Find out in our full research report (it’s free).
Snap (SNAP) Q2 CY2025 Highlights:
- Revenue: $1.34 billion vs analyst estimates of $1.35 billion (8.7% year-on-year growth, in line)
- Adjusted EPS: $0.01 vs analyst estimates of $0.02 (in line)
- Adjusted EBITDA: $41.27 million vs analyst estimates of $46.24 million (3.1% margin, 10.7% miss)
- Operating Margin: -19.3%, up from -20.5% in the same quarter last year
- Daily Active Users: 469 million, up 37 million year on year
- Market Capitalization: $12.29 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Snap’s Q2 Earnings Call
- Ross Adam Sandler (Barclays) asked about the Sponsored Snaps opportunity and the ad auction pricing issue. CEO Evan Spiegel described Sponsored Snaps as a profound shift, citing strong early engagement, while CFO Derek Andersen detailed the auction misstep and its short-term revenue impact.
- Richard Scott Greenfield (LightShed Partners) inquired about the split between direct response and brand advertising, and Snap’s capital requirements for AR. Andersen confirmed most ad platform impact was in direct response; Spiegel emphasized Snap’s free cash flow supports AR investment, with potential for future partnerships.
- Mark Elliott Shmulik (Bernstein) sought insights into engagement trends among U.S. users and the outlook for Snapchat+ growth. Spiegel described a modest decline in North America active days but highlighted increased calling and strong subscription momentum.
- Mark Stephen F. Mahaney (Evercore) requested details on stock-based compensation reductions and Spotlight monetization progress. Andersen said hiring is being tightly managed to prioritize profitability, while Spiegel noted Spotlight is becoming a larger share of revenue with ongoing format innovations.
- Justin Post (Bank of America) asked about initiatives to reaccelerate U.S. user growth and ad revenue guidance. Spiegel pointed to upcoming product launches to drive engagement, while Andersen explained that guidance reflects recent ad revenue trends and efforts to build demand for Sponsored Snaps.
Catalysts in Upcoming Quarters
Looking forward, the StockStory team will be watching (1) the pace of advertiser adoption and revenue contribution from Sponsored Snaps, (2) expansion and retention in Snapchat+ and Lens+ subscriptions as new features are introduced, and (3) the public launch and reception of Snap’s AR glasses and related developer innovations. Execution on AI-driven advertising tools and engagement initiatives in mature markets like North America will also be key areas to monitor.
Snap currently trades at $7.29, down from $9.38 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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