Shares of Snap Inc., the parent company of Snapchat, declined by over 10% following the release of its third-quarter earnings report on Wednesday. The market reaction was driven by the company missing estimates for both revenue and global daily active users (DAU). According to data from LSEG, Snap reported revenue of $1.72 billion, slightly below the expected $1.73 billion. Additionally, StreetAccount noted that global DAU reached 495 million, falling short of the projected 499 million.
Despite the miss on top-line metrics, the company demonstrated significant year-over-year growth in sales, which jumped 14%. Net income for the quarter was $56 million, a notable turnaround from the $104 million net loss recorded in the same period last year. Adjusted earnings also outperformed expectations, coming in at $383 million against analyst projections of $337 million. The average revenue per user (ARPU) remained flat at $3.48, matching market forecasts.
Looking ahead, Snap provided guidance for the fourth quarter with a revenue forecast ranging between $1.95 billion and $1.99 billion. The midpoint of this range exceeds Wall Street's estimate of $1.95 billion. Similarly, adjusted earnings for the upcoming quarter are projected to fall between $490 million and $525 million, surpassing the analyst expectation of $498 million.
In an investor letter, Snap executives announced a strategic shift in how they report audience metrics. Starting in the first quarter of 2027, globally monthly active users (MAU) will become the company's primary audience metric. The company reported 977 million MAU for the current quarter. Executives explained that while daily engagement has historically been stable relative to monthly figures, they do not intend to optimize Snapchat solely around daily use if it compromises long-term community value. They stated that a longer-term horizon better aligns their metrics with product and safety decisions that foster durable audience growth.
During the earnings call, Snap Chief Commercial Officer Ronan Harris attributed some of the third-quarter sales pressure to reduced spending by unspecified consumer packaged goods (CPG) companies. Harris linked this decline in CPG spending to macroeconomic pressures in the United States and the Middle East. However, he highlighted positive growth signs from diversified sectors, particularly financial services in the U.S., indicating a strategy to find traction in verticals outside of the struggling CPG sector.
Sources: CNBC Markets.