Snap Inc. (SNAP) shares saw a modest uptick in after-hours trading following the release of its fourth-quarter earnings report. The social media giant surpassed sales expectations, posting $1.72 billion in revenue against the $1.70 billion anticipated by Wall Street analysts. This performance was further bolstered by the announcement of a significant $500 million stock repurchase program, signaling confidence in the company’s financial standing and future prospects.
Despite the positive revenue surprise, the company fell slightly short on global daily active users (DAU), reporting 474 million compared to the 478 million projected. However, the average revenue per user (ARPU) presented a stronger picture, reaching $3.62, exceeding the $3.56 consensus.
Looking ahead, Snap’s first-quarter revenue guidance of $1.50 billion to $1.53 billion came in below analyst estimates of $1.55 billion, a point that contributed to a slight dip in after-hours trading as analysts probed management on potential regulatory headwinds.
The company’s fourth-quarter results highlighted a 10% year-over-year increase in sales. Net income saw a dramatic surge, soaring to $45.2 million from $9.1 million in the prior year, a nearly 400% leap. Adjusted EBITDA also outperformed expectations, reaching $358 million, surpassing the $300 million projected. For the first quarter, Snap anticipates adjusted EBITDA to range between $170 million and $190 million, with the midpoint exceeding StreetAccount’s estimate of $178 million.
Snap attributed the sequential decline of 3 million DAUs in the fourth quarter to a strategic reduction in marketing spend, a move aimed at prioritizing more profitable growth avenues. Additionally, the company detailed the impact of Australia’s new social media age verification laws, which led to the removal of approximately 400,000 accounts in the region during the quarter. North American DAUs also registered a slight decline, falling to 94 million from a projected 97 million.
During an earnings call, CEO Evan Spiegel addressed concerns regarding regulatory challenges, particularly those impacting younger users. He acknowledged ongoing legal proceedings but emphasized that revenue generated from users under 18 is not “material” to the company’s overall financial picture, suggesting a degree of confidence in navigating the evolving regulatory landscape.
The company is increasingly focusing on its subscription offerings, including Snapchat+ and its new Memories Storage Plans. These services collectively saw subscriber growth of 71% year-over-year, reaching 24 million by the end of the fourth quarter, with memory storage plans noted as a significant driver of this expansion.
In a strategic move to bolster its presence in the augmented reality space, Snap recently established Specs Inc., a wholly owned subsidiary dedicated to the development and marketing of its AR glasses. Spiegel expressed enthusiasm for the upcoming 2026 launch of these AR glasses, emphasizing the need for a distinct brand identity for Specs to appeal to a different demographic than the core Snapchat user base. While acknowledging the potential for future external capital raises for the AR venture, Snap intends to carefully manage such investments to maintain its ownership stake and mitigate dilution.
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