Snap shares rocket on revenue beat, stronger-than-expected forecast

Core Insights - Snap Inc. reported third-quarter earnings that exceeded analysts' expectations, leading to a more than 20% increase in share price, alongside a $500 million stock repurchase program [1] - The company announced a partnership with Perplexity AI, which will integrate conversational search into Snapchat, with expected revenue contribution starting in 2026 [2][3] Financial Performance - For Q3, Snap's sales grew by 10% year-over-year, reaching $1.51 billion, compared to the expected $1.49 billion [3][8] - The net loss for Q3 was $104 million, an improvement from a net loss of $153 million in the same quarter last year [3] - Adjusted EBITDA for Q3 was $182 million, surpassing the projected $125 million [3] - For Q4, Snap anticipates sales between $1.68 billion and $1.71 billion, with a midpoint of $1.695 billion, slightly above Wall Street's expectation of $1.69 billion [2][4] User Metrics and Engagement - Snap reported 477 million global daily active users, slightly above the expected 476 million [8] - The global average revenue per user (ARPU) was $3.16, exceeding the expected $3.13 [8] - The company warned that new regulations, particularly regarding age verification, could negatively impact user engagement metrics [4][5][6] Regulatory Environment - New laws in Australia and the U.S. are set to impose penalties on social media companies for failing to prevent underage users from accessing their platforms [5][6] - Snap is preparing for upcoming platform-level age verification measures from Apple and Google, which may further affect user metrics [6][7] Market Context - The earnings report comes amid a broader trend where major tech companies like Meta, Alphabet, and Amazon have reported strong digital advertising sales [10] - Snap's challenges with user engagement metrics are contrasted with the robust performance of other tech firms in the digital advertising space [9][10]