Snapchat’s User Growth Returns, Stock Rockets 8% on Strong Q1 Performance

Snap Inc. reports it added 4 million users during the first quarter — the first time it’s reported positive user growth in a year

Last Updated: April 23, 2019 @ 2:20 PM

Snap Inc.’s 2019 rebound looks poised to continue, with the Snapchat parent company getting back to adding users — something it hasn’t done since early 2018 — while posting better-than-expected revenue when it shared its Q1 financials on Tuesday afternoon.

The Los Angeles-based company reported revenue of $320.4 million — surpassing Wall Street estimates of $306.5 million — while also posting a loss of 10 cents per share, compared to analyst projections of a loss of 12 cents per share.

Still, the most striking figure in Snap’s Q1 report is its user growth.

Snap added 4 million new daily active users and closed the first quarter with 190 million DAUs overall. The user growth represented a 2% quarter-over-quarter  increase, and marked the first time since Q1 2018 that Snap reported positive user growth. The company lost a combined 5 million users during the second and third quarters last year, after a poorly-received app redesign was adopted. The app’s growth remained flat during the fourth quarter of last year.

Snap’s growth came from 1 million new users in both the U.S. and Europe, coupled with another 2 million international users.

After hitting issues rolling out its Android app last year — something that contributed to its growth issues — Snap said its Droid app is now available worldwide in its letter to shareholders on Tuesday. Snap chief Evan Spiegel, in the company’s shareholder letter, pointed to this as one of the driving forces behind Snap’s first quarter results.

“In the first quarter we delivered strong results across our business with growth in daily active users and revenue,” Spiegel said. “Our new Android application is available to everyone, with promising early results. This month we announced several new products that we believe will drive further engagement and monetization. As we look towards the future, we see many opportunities to increase our investments, and will continue to manage our business for long-term growth.”

Heading into Tuesday afternoon, Snap’s stock had already doubled since the beginning of the year, climbing from sub-$6 per share to about $12 per share as the market closed. Those gains continued after Snap reported its Q1 financials, with its stock jumping 8% in after-hours trading, hitting $13 per share.

Snap not only added more users than anticipated during the first quarter, but made more money off of them that analysts expected, too. Snap reported average revenue per user of $1.68, topping analyst estimates of $1.62 ARPU for Q1. Snap’s revenue growth comes after the company has spent much of the last two years building ad tools to help companies better market on Snapchat.

At its first annual Partner Summit in West Hollywood, California earlier this month, Snap unveiled a new slate of original series, including a daily BuzzFeed news show. The programming will stick to a familiar formula for Snap — brief shows that are about 5 minutes long, shot vertically, and aimed at its healthy Millennial and Gen Z audience. Snap also added several new features, like an in-app gaming hub and the ability for users to upload their stories to Tinder and other apps. After Facebook-owned Instagram has copied many of its core features in recent years, the new features appear likely to separate Snap once again from its primary competitor — and give users another reason to check out Snapchat.

Spiegel, echoing comments he made at the Partner Summit, said in his Tuesday remarks that Snap has “achieved significant reach with Millennials and Gen Z in key markets like the United States, where we now reach 75% of all 13-34 year-olds. As of March, our ads can now reach more 13-34 year-olds than Instagram in the United States.”

Snap will hold a conference call to discuss its Q1 results at 5:00 p.m. ET.