Snap shares drop 10% as revenue misses Wall Street targets

Snap Inc. stock declined by more than 10% on Wednesday after the company released third-quarter financial results that fell short of investor expectations.

The Snapchat parent company generated $1.72 billion in revenue during the quarter. This figure was slightly below the $1.73 billion consensus estimate from LSEG. Global daily active users totaled 495 million, missing the 499 million target set by StreetAccount.

Despite the revenue miss, the company reported a net income of $56 million. This marks a financial improvement compared to the $104 million net loss recorded in the same period last year. Third-quarter sales increased by 14% on a year-over-year basis. Adjusted earnings reached $383 million, exceeding the $337 million projection from analysts.

Executives outlined a strategic shift in how the company measures its audience. An investor letter stated that globally monthly active users will serve as the primary audience metric starting in the first quarter of 2027. The company reported 977 monthly active users for the current quarter. The letter explained that daily engagement has remained stable as a percentage of monthly engagement. Management noted it does not intend to optimize the platform solely for daily use if it compromises long-term value for the community.

Ronan Harris, the chief commercial officer, addressed the revenue shortfall during an earnings call with analysts. He cited reduced spending from consumer packaged goods companies as a primary factor. Harris attributed this decline in advertising budgets to macroeconomic pressures in the United States and the Middle East. He stated that the company is seeing positive growth signs in other sectors, specifically financial services in the U.S. The strategy involves looking beyond the pressures in the CPG sector to find traction in these other verticals.

Snap provided a forecast for the fourth quarter, projecting revenue between $1.95 billion and $1.99 billion. The midpoint of this range is higher than the $1.95 billion estimate from Wall Street. The company also expects fourth-quarter adjusted earnings to fall between $490 million and $525 million. Analysts had previously projected that figure to be $498 million.