Snap surprised Wall Street on Tuesday with a rebound in user growth for its Snapchat messaging app, showing resilience amid competition with Facebook's Instagram and sending shares up almost 30 percent. On average, analysts estimated $252.95 million in revenue and a loss of 16 cents a share.
Snap Inc said on Tuesday it added more users than expected to its Snapchat messaging app as it fights to fend off competition from Facebook Inc's Instagram, sending it shares up by almost 30 percent. The poor report included slowing user growth and a revenue miss, and showed no clear path to profitability. The report, due out after the bell, will round out the Snapchat operator's rather bleak first year as a public company. Ever since the company behind Snapchat publicly unveiled paperwork with plans for a $20 billion IPO nearly exactly a year ago, concerns have surfaced about Snap's long-term viability.
Snapchat paid its publishing partners "more than $100 million" in revenue-sharing advertising deals a year ago, up from $58 million in 2016 and just $10 million in 2015, the company reported on Tuesday. This represented 4.5 million new DAUs, or growth of about 17% year-over-year, but just 3% sequential growth. However, even if it hits that number, it would still represent the sixth straight quarter of year-over-year revenue growth deceleration. The business had revenue of $207.90 million during the quarter, compared to the consensus estimate of $236.71 million. Squali anticipates that the company will post earnings per share of $0.16 for the year.
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The app now has 187 million users, which still puts it far behind rivals like Instagram Stories, a Snapchat clone that now has more than 300 million daily users.
During Snap's third quarter earnings call, co-founder and CEO Spiegel acknowledged that Snapchat is harder to understand than he initially realized. "Compared to the old design, core metrics around content consumption and time spent in the redesigned application are disproportionately higher for users over the age of 35, which bodes well for increasing engagement among older users as we continue to grow our business".