Business
Snap beats revenue and user growth estimates, announces $500 million buyback
Global Banking & Finance Review®
Company
By Sheila Dang
(Reuters) -Snap beat Wall Street expectations for both quarterly revenue and user growth on Tuesday, as the parent company of messaging app Snapchat has been able to lure back some advertisers with better-performing ad features.
It also announced a share repurchase program of up to $500 million.
Shares of Snap initially fell 8% in after-market trading before rising 10% to $12.
The Santa Monica, California-based company, which earns most of its revenue by selling digital advertising, has long struggled against larger competitors like Facebook and Instagram owner Meta Platforms. To better compete, Snap invested in machine learning to improve its targeting of ads to users and also made it easier for small- and medium-sized businesses to advertise on Snapchat.
Revenue in the third quarter ended Sept. 30 grew 15% year-over-year to $1.37 billion, beating the average analyst estimate of $1.36 billion.
Snap said it expects current-quarter revenue in the range of $1.51 billion to $1.56 billion. Wall Street was targeting the high end of the range, according to Refinitiv data.
The fourth quarter includes the holiday shopping season, a crucial period in which brands spend heavily to promote their products and services. Advertising from large companies has historically helped boost Snap’s business at the end of the year, but demand from these companies has been lower in recent months, Snap said in a letter to shareholders.
Two new ad formats could help grow demand from large advertisers, including one that lets advertisers promote their business on the Snap Map.
“We’re seeing brands try to drive people back into their stores and establishments,” said Snap CEO Evan Spiegel during an earnings call with analysts. “The feedback has been great.”
Daily active users of Snapchat grew 9% year-over-year to 443 million, beating analyst estimates of 441 million.
Last month, Snap said it would begin rolling out a redesign of Snapchat that simplifies the app from five separate sections to three. Early testing of the redesign shows it has helped grow usage among people who were not previously heavy users of Snapchat, Spiegel said.
Snap reported adjusted earnings per share of 8 cents during the third quarter, above Wall Street expectations of 5 cents.
(Reporting by Sheila Dang in Austin, TexasEditing by Matthew Lewis and Chris Reese)
Revenue growth refers to the increase in a company's sales over a specific period, often expressed as a percentage. It indicates how effectively a company is expanding its business.
A share repurchase program is when a company buys back its own shares from the marketplace, reducing the number of outstanding shares and often increasing the value of remaining shares.
Digital advertising revenues are the earnings generated from online advertisements, including display ads, social media ads, and search engine marketing, which companies use to promote their products or services.
Machine learning in advertising involves using algorithms to analyze data and improve ad targeting, helping businesses reach the right audience more effectively and efficiently.
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