Snap beats estimates for user growth and revenue, shares rise


© Reuters. Pedestrians walk past the front of the New York Stock Exchange (NYSE) with a Snap Inc. logo hung on the front of it shortly before the company’s IPO in New York

By Sheila Dang

(Reuters) – Snap Inc (N:), owner of the single-view messaging app Snapchat, on Tuesday beat Wall Street’s third-quarter forecasts for user growth and revenue as more people signed up to chat with friends and family during the coronavirus pandemic.

Shares of Snap rose 18% to $33.85 in after-hours trading.

Daily active users (DAUs), a widely watched metric by investors and advertisers, rose 18% year-over-year to 249 million in the quarter ended Sept. 30, the company said in a statement. Analysts had expected 244 million, according to IBES data from Refinitiv.

Revenue, which Snap earns mainly from selling ads on the app, jumped 52% to $679 million, widely beating analysts’ consensus estimate of $555.9 million.

Snap has positioned itself as a safe place for brands to advertise because it focuses on one-on-one messages which disappear once they are read.

That reputation served Snap well in the third quarter, when over 1,000 advertisers boycotted larger rival Facebook Inc (O:) for the month of July in response to issues of hate speech on the platform, and as popular short-form video app TikTok faced the possibility of a U.S. ban over national security concerns.

It opened an opportunity for Snap as companies reviewed their ad spending, and helped contribute to revenue growth, said Jeremi Gorman, Snap’s chief business officer, in prepared remarks for an earnings call with analysts.

Average revenue per user was $2.73, up 28% from the year-go quarter.

Snap’s net loss narrowed to $199.8 million, or 14 cents per share, from $227.37 million, or 16 cents per share, a year earlier.

The company said it expected continued momentum in user growth and forecast about 257 million daily active users in the fourth quarter.

Snap said current-quarter revenue could grow between 47% to 50% over the year-ago period, but cautioned that it was unclear how the pandemic would affect year-end holiday advertising.

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