Snap Bounces Back With Huge Revenue and User Growth, Stock Surges 25 Percent

Snap added 9 million daily active users, a 50 percent jump compared to Wall Street estimates for Q4

Last Updated: February 6, 2018 @ 2:08 PM

Snap Inc., Snapchat’s parent company, easily posted its best quarter since going public last year, blowing past revenue and user growth estimates when the company reported its Q4 earnings on Tuesday.

After the bell, Snap reported $285.7 million in revenue and a loss of 13 cents a share for the three months ending Dec. 31. On average, analysts estimated $252.95 million in revenue and a loss of 16 cents a share. The sales boost represented a 72 percent year-over-year increase.

The number of users were also up for Snapchat, with the company adding 9 million daily users to hit 187 million. Wall Street expected Snap to add about 6 million daily users during the quarter. Snapchat’s user growth was better than a 5 percent jump quarter-over-quarter — only three months removed from posting a 2.9 percent growth rate.

Investors were snapping up shares in after-hours trading, with Snap’s stock soaring 25 percent to about $17.60 a share — coming in above its IPO price from last March.

Snap’s Average Revenue Per User did better than the $1.36 ARPU analysts expected. Snap made $1.53 per user — a 46 percent jump year-over-year — and a healthy bump from its $1.17 reported during Q3. Snap has invested heavily in driving its ad business forward, buying Placed, a company that helps measure in-store foot traffic, and adding ad-serving tools for its clients.

In its first three quarters since going public, Snap had been under fire for uninspiring user growth, along with tepid sales. That trend was finally bucked on Tuesday, with the company reversing course on both fronts.

Less than one year after going public, Snap is already making major changes. CEO Evan Spiegel announced an app redesign following its underwhelming Q3 earnings, making Snapchat “easier to use.” The updated Snapchat — being tested in markets like the U.K. and Australia — will prioritize content based on interactions, rather than chronological order, and place a renewed emphasis on social creators. Its expected to roll out worldwide by the end of Q1.

Snap also planned on releasing more original scripted content by the end of 2017, but that was bumped due to the redesign. Snap VP of Content Nick Bell said last month that the launch of its next batch of programming is “imminent.” Bell reiterated 3.5 billion snaps are sent each day.

For Snap shareholders, it’s been a rollercoaster ride in the past three months. Soon after its Q3 earnings, Chinese investment behemoth Tencent took a 10 percent stake in Snap. Shares dipped from about $15 in early November to below $13 midway through the month, before jumping again in December on confidence in its upcoming app redesign. That enthusiasm waned heading into earnings, however, with shares of Snap trading at $TK as markets closed on Tuesday.

The company will hold a call at 5:00 p.m. ET to discuss its earnings.