Snap shares jump about 25% on good earnings beat and major acceleration for sales growth. Snapchat parent company Snap (Snap) late Thursday reported earnings that easily topped expectations, with sales up 21% for Q1 as improvements to its advertising system delivered results faster than anticipated. Shares of Snap saw a jump of 25% to $14.32 in after-market trading.
The owner of photo messaging app Snapchat has been working over the past year to improve how it targets ads to users and simplify the way people interact with the ads. The company has historically struggled to compete against much larger rivals like Facebook owner Meta Platforms for digital ad revenue.
Snap financial performance
The Santa Monica, Calif.-based social media company Snap said it earned an adjusted 3 cents per share on sales of $1.2 billion for the March-ending quarter. On average, analysts projected Snap would post an adjusted loss of 5 cents per share on sales of $1.12 billion, according to FactSet. .
Snap Q1 earnings saw the sales of $1.24 billion at the midpoint of its range. Heading into the report, analysts projected Snap would tally $1.22 billion in sales for the June-ending quarter, according to FactSet.
Rise in Snap revenue
The results represent a major acceleration for Snap’s revenue growth. Snap sales grew 5% year over year in the company’s December quarter and 5% in the September-ending period. After its December quarter, Snap’s meager revenue growth led to some unflattering comparisons to Meta Platforms (META), the larger and faster-growing company behind Facebook and Instagram.
Snap sales growth
But Snap’s sales growth appears to finally be bouncing back from a digital ad market slump that started in 2022. The 21% growth for the March quarter is the highest for Snap in two years.
In a letter to shareholders, Snap executives said revenue growth is “improving faster than we had previously anticipated.”
The company credited improvements to its advertising platform and increased demand for its direct-response advertising. Direct-response ads are designed to drive a response from a user, such as clicking directly into a product page for an e-commerce business. Snap has focused on the category to drive growth.
Growth in Snapchat
Snap’s shareholder letter also highlighted growth for Snapchat+. The subscription product offers access to exclusive app features for $3.99 per month. Paying users tripled year-over-year to 9 million, the company said.
Meanwhile, daily active users of Snapchat increased 10% year over year to 422 million. The company said it expects to reach 431 million users by the end of June.
Snap sales outlook
Meanwhile, the midpoint of Snap’s sales guidance for its June quarter would represent a roughly 16% increase from a year earlier. Snap officials noted in the company’s shareholder letter that the company faces a tougher year-over-year comparison with the current quarter, along with other seasonal factors.
Snap stock
Prior to earnings, Snap gained 3% in Thursday trading. Shares have lost 32% this year but are up 11% over the past 12 months.
On the stock market today, Snap stock is up more than 27% at 14.51 in recent after-hours action.
