Snapchat smashes revenue estimates as users and messages soar in lockdown

Snapchat smashes revenue estimates as users and messages soar in lockdown

Snap has reported third-quarter results late Tuesday that beat revenue estimates and earnings, driven by a big jump in users and similarly large jump in the number of messages sent.

The social media company reported an adjusted profit of 1-cent per share on revenue of $678 million. Wall Street expected an adjusted loss of 5 cents on revenue of $550.5 million. Revenue jumped 52% from the year-ago period.

Revenue in the three months ended in September rose by 52%, year over year, to $678.7 million, yielding EPS of a penny per share. That compares to the average analyst estimate for $551 million and 5 cents per share.

Snap’s user count, on a daily average basis, rose by 39 million users from the prior-year period, or 18%, to 249 million.

Snaps sent in the Snapchat program, a measure of engagement on the platform, rose by 25%, the company said, without listing the total number.
The company also touted its Discover feature in the app, saying that the amount of time each user spent looking at the feature’s programming rose by 50%, year over year.

Snapchat, which is among the first companies to make use of the rear-mounted augmented reality camera in Apple’s new iPhone 12, made several remarks about the new camera and filter capabilities of its app.

For example, the company noted it had added the ability for two-dimensional rendering of a person’s full body, and added digital clothing that can be res’d onto a user’s avatar.

“Snapchatters can now dress their Bitmoji avatars in a new collection of 19 different digital apparel and sneakers from Nike’s Jordan brand, including the new Air Jordan XXXV.”

As was the case last quarter, Snap management declined to provide a forecast for this quarter’s results, citing the uncertainty of the COVID-19 pandemic. The company is hosting a conference call with analysts this evening, at 5 pm, eastern time, and you can catch it on the company’s investor relations home page.
Despite declining to forecast, the company speculated that its sales may rise by as much as 50% this quarter, which would be well above Wall Street’s expectation for a 30% rise in revenue.

“Advertising demand in Q4 has historically been bolstered by the holiday season in the latter portion of the quarter, and it is not clear at this time whether that key source of advertising demand will materialize in the same way this year as in prior years,” the company said in prepared remarks circulated in advance of the earnings call.

“Assuming that the current favorable operating conditions persist, and that the holiday season materializes in line with what we have experienced in prior years, we believe that year-over-year revenue growth of 47 percent to 50 percent is attainable in Q4,” it said.

On the conference call with analysts, founder and CEO Evan Spiegel told analysts that the company is prioritizing feature development on Android before iOS. “We can actually move faster on Android now than iOS,” said Spiegel. “So, huge change.”

“Snapchat premium content paying off for marketers”

Commenting on the results, Yuval Ben-Itzhak, CEO at Socialbakers, said: “Snap’s Q3 earnings results yet again confirm that 2020 is a good year for the platform. With people spending more time online as a result of the pandemic, Snapchat’s premium content has proven to be a favourite with users and marketers alike. The overall increase in content consumption is nothing but good news for Snapchat.

“Data from App Annie showed that almost 60% of Netflix users also use Snapchat, as consumers are seeking out entertainment across a suite of apps to stay entertained during the lockdown. We are seeing that mobile is emerging as the first screen for users and user-generated content, which fuelled Snapchat’s growth from the get go, is front and centre when it comes to engagement.

“The ability to innovate remains a key differentiator for all social platforms when it comes to the fight for eyeballs and Snapchat hasn’t slowed the pace in Q3. With new features like City Painter and Sounds, a clear challenger to TikTok and Instagram Reels, Snapchat is keeping ahead of the innovation curve and keeping its users engaged.”