Snap's Stock Soars 28% on Surprise Profit

Snap Inc.'s stock surged an impressive 28% on Friday following the company's unexpected profit announcement and better-than-expected sales and user numbers, much to the surprise of Wall Street.

Closing at $14.55, the stock saw its most significant percentage gain since 2022. This boost came despite the fact that the stock had been down 14% for the year due to a sharp 31% drop in February.

In the first quarter, Snap reported a revenue increase of 21%, reaching $1.19 billion, up from $989 million a year earlier. This surpassed analysts’ estimates, which had predicted sales of $1.12 billion, according to LSEG.

Moreover, the company reported adjusted earnings per share of 3 cents, contrary to analysts' expectations of a 5-cent loss. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also exceeded expectations, standing at $46 million, compared to analysts’ anticipated loss of $68 million.

Snap attributed this strong performance to its operating expense discipline and accelerating revenue growth. The company has been focusing on rebuilding its advertising business, and it seems that these investments are starting to pay off. According to Snap, revenue growth was primarily driven by improvements in its advertising platform and demand for its direct-response advertising solutions.

During the earnings call, Snap's CFO Derek Andersen noted, “I think more broadly, we saw a much more robust brand environment, which played out in all of our regions in Q1.”

User growth also exceeded expectations, with Snap reporting 422 million daily active users (DAUs) in the first quarter, a 10% increase year over year. This figure topped the average analyst estimate of 420 million, according to StreetAccount.

In February, Snap announced a 10% reduction of its global workforce, approximately 500 employees. However, the company stated on Thursday that headcount and personnel costs would "grow modestly" through the rest of the year.

Advertising revenue for the first quarter reached $1.11 billion, while Snap's “Other Revenue” category, primarily driven by Snapchat+ subscribers, reached $87 million, marking a 194% increase year over year. Snap reported more than 9 million Snapchat+ subscribers for the period.

Despite this impressive growth, Snap still lagged behind Meta, which reported 27% growth in its first-quarter results, exceeding expectations. Meta shares, however, dropped after the company issued a light forecast and discussed its long-term investments.

Looking ahead, Snap expects second-quarter revenue between $1.23 billion and $1.26 billion, surpassing analysts' expectations of $1.22 billion, according to StreetAccount. With its recent performance and optimistic outlook, Snap seems poised for further growth and success in the coming quarters.