Snapchat owner Snap Inc. reported its third-quarter earnings Tuesday afternoon, beating Wall Street expectations on both revenue and earnings per share. The company reported revenue of $1.2 billion and an EPS of $0.02.
Wall Street had been expecting revenue of $1.11 billion and earnings per share of -0.04.
The company also said that its daily active user base had grown to 406 million, an improvement of 12 percent year over year. However, the company continues to lose money, recording a $368 million loss in Q3.
Snap, led by CEO Evan Spiegel, had warned that Q3 would be difficult in its last quarterly report, when it disclosed 397 million daily active users and losses of $377 million. It seems he may have been somewhat overly cautious.
“Our revenue returned to positive growth in Q3, increasing 5% year-over-year and flowing through to positive adjusted EBITDA as our reprioritized cost structure demonstrated the leverage in our business model,” said Spiegel in a statement. “We are focused on improving our advertising platform to drive higher return on investment for our advertising partners, and we have evolved our go-to-market efforts to better serve our partners and drive customer success.”
Snap also said that its COO, Jerry Hunter, would retire, but would stay as an adviser through next summer.
“I am deeply grateful to Jerry for the meaningful contributions he has made over his many years at Snap,” added Spiegel. “His work to improve our advertising platform, serve our community, and build a strong team has helped lay the foundation for our future growth.”
The company is in the midst of a turnaround effort, with Spiegel previously telling investors he has three core priorities: “First, investing in our products to sustain community growth and deepen engagement. Second, investing heavily in our direct-response business to deliver measurable return on spend for our advertising partners. Third, cultivating new sources of revenue to diversify our topline growth to build a more resilient business.”
Artificial intelligence is also a focal point for the company, with Snapchat already including MyAI, a digital assistant.
Notably, the company said that it would not give “formal guidance” for Q4, citing the Israel-Hamas War.
“We observed pauses in spending from a large number of primarily brand-oriented advertising campaigns immediately following the onset of the war in the Middle East, and this has been a headwind to revenue quarter-to-date,” the company said in its quarterly report. “While some of these campaigns have now resumed, and the impact on our revenue has partially diminished, we continue to observe new pauses and the risk that these pauses could persist or increase in magnitude remains. Due to the unpredictable nature of war, we believe it would be imprudent to provide formal guidance for Q4.”
Spiegel elaborated on the issue during the company’s earnings call.
“When we look back historically, for example to what we all experienced at the onset of the war in Ukraine and the impact that that had on business and the operating environment,” Spiegel said, “we realized that war is fundamentally unpredictable.”
