Snap Back: Snapchat Posts Best User Growth in 2 Years, Stock Surges 9%

Snapchat added 13 million new users during the second quarter, pushing it past 200 million users overall

Last Updated: July 23, 2019 @ 2:00 PM

Snapchat’s rocky 2018 appears to be firmly in the past after Snap Inc. posted its best user growth in years and smashed Wall Street’s revenue expectations when the company reported its Q2 financials on Tuesday afternoon.

Snapchat added 13 million new daily active users, marking a 6.3% quarter-over-quarter increase and pushing it to 203 million DAUs overall. The last time Snapchat added more than 10 million DAUs in a single quarter was mid-2016, and its 6.3% quarter-over-quarter growth is its biggest since Q4 2017.

Snap reported revenue of $388.3 million, a 48% year-over-year increase and easily surpassing analyst estimates of $360.3 million in sales. The company’s loss of 6 cents per share was also better than the 10 cents per share loss analysts had projected.

Investors were jazzed by the revenue and user growth, with Snap shares increasing 9% to $16.10 per share in early after-hours trading. It’s a stark turnaround for Snap, after trading at about $5 per share last December, following back-to-back quarters where Snapchat lost users, in part due to a botched app redesign.

“The growth in our community, engagement, and revenue is the result of several transitions we completed over the past 18 months,” CEO Evan Spiegel said in a statement. “We look forward to building on our momentum and making significant ongoing progress in each of these areas.”

Snap posted average revenue per user of $1.91, a 37% year-over-year increase and the second-best quarterly ARPU in the company’s history.

One indication Snapchat’s rebuilt Android app, unveiled in April, has clicked with users: Snap reported it added 7 million new users outside the U.S. and Europe, a 21% year-over-year increase. Snapchat now has 83 million users in North America, 64 million in Europe, and 56 million from all other markets.

Snap’s loss for the quarter dropped to $255 million, after losing more than $350 million during the same period last year. The company projected sales of $410-$435 million next quarter.

This was the first quarter since Snap unveiled several new original shows and in-app video games in April. Goldman Sachs analyst Heath Terry, in a note to clients earlier this month, said there were signs Snap’s new slate, together with a revamped Android app, had already spurred a Snapchat resurgence.

“Total app downloads for May, the first month reflecting these recent innovations, was a record 41 million (the previous record was 30 million from mid-2016), representing a stark reversal of what were otherwise multi-year lows in app downloads that the platform experienced through most of 2018 and early 2019,” Terry said. “In addition, sentiment in App Store reviews on iOS has become significantly better in the U.S. over the last year.”

Snapchat’s downloads were also boosted by the launch of its viral gender face-swap filter that same month.

To this point, Snap’s brief, 3-5 minute shows had largely hinged on their premise and influencers that appeal to its Gen Z audience, rather than raw star power. That might be changing, though, with Snap partnering with Arnold Schwarzenegger and Kevin Hart on two new shows earlier this month. Schwarzenegger will be giving fans motivational advice in his short-form series, “Rules of Success with Arnold Schwarzenegger,” while details on Hart’s show are still under wraps.

In April, Spiegel proudly boasted at Snap’s first annual “Partner Summit” that Snapchat “now reaches nearly 75% of 13-34-year-olds” in the U.S., and 90% of 13-24-year-olds.

“In fact, we reach more 13-24-year-olds than Facebook or Instagram in the United States, the U.K., France, Canada and Australia,” Spiegel added.

The company will hold a call to discuss its Q2 financials at 2:00 p.m. PST.