Snap shares drop after weak Q3 numbers

Snap Inc. shares declined more than 10 percent on Wednesday after the parent company of Snapchat reported third-quarter results that fell short of Wall Street expectations for both revenue and user engagement. The stock’s movement reflected investor reaction to a quarterly report that showed a slight dip in top-line growth metrics despite an improvement in bottom-line profitability.

The company generated $1.72 billion in revenue for the quarter, compared with the $1.73 billion expected by analysts at LSEG. Global daily active users totaled 495 million, missing the 499 million projected by StreetAccount. Average revenue per user remained flat at $3.48, matching analyst forecasts. Sales rose 14 percent year over year, and the firm reported a net income of $56 million, a sharp turnaround from the $104 million net loss recorded in the same period last year. Adjusted earnings reached $383 million, exceeding the $337 million estimated by StreetAccount.

Snap management provided guidance for the upcoming fourth quarter, projecting revenue between $1.95 billion and $1.99 billion. This range places the midpoint above the $1.95 billion average analyst estimate. Adjusted earnings for the fourth quarter are expected to land between $490 million and $525 million, slightly higher than the $498 million forecast. In an investor letter, executives announced that globally monthly active users will become the company’s primary audience metric starting in the first quarter of 2027. The firm reported 977 million monthly active users for the current quarter.

Ronan Harris, the company’s chief commercial officer, explained the revenue shortfall during an earnings call. He cited lower spending from consumer packaged goods companies, attributing the reduction to macroeconomic pressures in the United States and the Middle East. Harris noted that daily engagement has historically remained stable as a percentage of monthly engagement, but the firm does not intend to optimize the product around daily use at the expense of long-term community value. He stated that a longer-term horizon better aligns reported metrics with product and safety decisions that strengthen relationships and support durable audience growth.

Harris added that the company is seeing positive signs of growth from diversified verticals, specifically financial services in the United States. The strategy involves looking outside of consumer packaged goods to find traction in these other sectors. The shift in focus aims to mitigate the impact of curbed spending in the CPG sector while capitalizing on growth in other advertising categories.