Core Insights - Snap exceeded Wall Street estimates for fourth-quarter revenue, driven by increased advertiser engagement during the holiday season, resulting in a share price increase of over 2% in extended trading [1] - Total active advertisers on Snap's platform rose by 28% in the fourth quarter, highlighting the strength of direct response ads and new ad formats [1] - Revenue for the quarter increased by 10% year-over-year to $1.72 billion, surpassing analysts' average estimate of $1.70 billion [2] Revenue Forecast - Snap anticipates first-quarter revenue to be between $1.50 billion and $1.53 billion, slightly below the estimate of $1.55 billion [3] - The forecast does not account for revenue from the Perplexity integration, a $400 million deal that is still under negotiation [3] Customer Segments - Strong growth was observed in the medium-customer segment globally, with North America being the largest contributor to dollar growth in this segment [4] - The company continues to face challenges in its North America large-customer business [4] Financial Performance - Snap's outlook for adjusted EBITDA is between $170 million and $190 million, exceeding estimates of $177.9 million, as the company focuses on profitable growth through cost control [5] - The net income for the fourth quarter was $45 million, up from $9 million a year earlier, while the net loss for 2025 narrowed to $460 million from $698 million in 2024 [5] Product Development - The company is enhancing its augmented reality offerings with the launch of an independent unit, Specs, and is diversifying revenue through its subscription service Snapchat+ [6] - Subscribers for Snapchat+ increased by 71% to 24 million in the fourth quarter, while daily active users rose by 5% year-over-year to 474 million, despite a decline of 3 million from the previous quarter [6]

Core Thesis - Snap Inc. is positioned as a misunderstood yet structurally improving platform with strong user growth and monetization potential, despite market perceptions of it as a declining social media app [2][4]. User Growth - In Q3 2025, Snap Inc. reported daily active users (DAUs) of 477 million and monthly active users (MAUs) of 943 million, reflecting year-over-year growth of 34% and 8% respectively [2]. - Over 180 million users engaged in gaming on the platform in Q3 2025, marking a 100% year-over-year increase, indicating a broadening ecosystem and user stickiness [5]. Monetization - Snap's monetization efforts are robust, with Snapchat+ revenue increasing by 54% year-over-year, achieving an annualized run rate exceeding $750 million [3]. - The company is shifting its focus from pure user growth to monetization strategies, introducing products like Sponsored Snaps and Lens+, aimed at increasing average revenue per user (ARPU) while maintaining user engagement [6]. Augmented Reality (AR) Engagement - Daily engagement with augmented reality (AR) features exceeds 8 billion lens uses, with over 350 million users interacting with AR experiences daily, highlighting the platform's scale and potential as a key differentiator in the AI era [4]. Strategic Direction - Snap is adopting a strategic flexibility akin to the "Costco Algorithm," aiming for higher value per dollar spent, suggesting a phase where sustained profitability and platform expansion can coexist [6]. - The company's fundamentals remain solid, with a focus on evolving its AR platform, which is seen as a critical component of its long-term investment case [7].

Core Insights - The company is focusing on maintaining Snapchat's unique messaging roots while appealing to advertisers targeting Gen-Z and younger users [1] - A new brand marketing campaign is being launched to redefine Snapchat's value proposition and brand positioning [1][2] Brand Positioning - Snapchat positions itself as the fastest and easiest way to connect with family and friends, emphasizing its unique feature of opening directly to the camera [2] - The platform aims to celebrate its differences from competitors like Instagram, which is known for curated online personas [2] Emphasis on Authenticity - The company highlights the importance of authenticity in its marketing, allowing users to express themselves without the need for over-curation [3] - Snapchat is seen as a platform where users can share more genuine moments, contrasting with the polished content typical of other social media [4] Advertising Strategy - Snapchat is enhancing user engagement by introducing more features like sponsored snaps, aiming for brands to appear authentically rather than as interruptions [5] - The Map feature is highlighted as a utility that fosters connections, allowing users to see where friends are located [6] New Product Offerings - A new product called Promoted Places has been launched, encouraging users to meet at nearby restaurants, further integrating brands into user experiences [7] Market Focus - India is identified as a key market, with 90% of users aged 13-34, showcasing a significant Gen-Z audience [8] - The platform is perceived as a positive and authentic environment, fostering real connections among users rather than follower-based interactions [9]

Core Insights - Snap Inc. has announced a partnership with Perplexity AI Inc. valued at up to $400 million, integrating AI-driven search capabilities into Snapchat, which is expected to create a new growth avenue for the company [1][2] - Following the announcement and a better-than-expected earnings report, Snap's stock surged over 25% in after-hours trading [1][2] Financial Performance - Snap reported Q3 revenue of approximately $1.51 billion, reflecting a year-over-year growth of about 10%, slightly above Wall Street's expectations of around $1.49 billion [2] - The company anticipates Q4 revenue to be between $1.68 billion and $1.71 billion, aligning with analyst expectations of approximately $1.69 billion [2] User Growth and Engagement - Snapchat's daily active users reached 477 million in Q3, representing an 8% year-over-year increase, while monthly active users approached 943 million [3] - The company aims to reach a target of 1 billion monthly active users [3] Advertising Business - Snap's advertising revenue for Q3 was $1.32 billion, showing a year-over-year increase of about 5%, despite previous challenges [3] - The company is focusing on small to medium-sized advertisers and has introduced new ad formats to drive growth [4] Subscription Services - Snap's subscription service, Snapchat+, has nearly 17 million paying users, contributing significantly to the company's revenue diversification [5] - The "Other Revenue" category, which includes Snapchat+, generated approximately $190 million in Q3, marking a substantial year-over-year growth of 54% [6] Regulatory Challenges - Snap has warned that user engagement may decline due to regulatory changes, such as the upcoming social media age restrictions in Australia [6]

Financial Data and Key Metrics Changes - Total revenue increased by 10% year-over-year to $1.51 billion, driven by improved advertising demand and the expansion of direct revenue streams [5][30] - Advertising revenue reached $1.32 billion, up 5% year-over-year, with direct response advertising revenue increasing by 8% year-over-year [30][31] - Net loss reduced by more than 30% year-over-year to $104 million, reflecting progress toward sustained profitability [7][36] - Adjusted EBITDA was $182 million, with adjusted EBITDA margins expanding to 12% [7][35] Business Line Data and Key Metrics Changes - Other revenue, including Snapchat Plus subscription revenue, increased by 54% year-over-year to $190 million [5][30] - Direct response advertising revenue growth was driven by strong demand for pixel purchase and app purchase optimizations, particularly from small and medium-sized business clients [30][31] - The North America large client solutions business experienced a modest decline, while the SMB advertising business grew over 25% [31][64] Market Data and Key Metrics Changes - Advertising revenue growth accelerated in Europe and the rest of the world, with Europe growing by 12% and the rest of the world by 13% year-over-year [31][32] - North America accounted for approximately 43% of total global revenue, decreasing as a share of total revenue by roughly 10 percentage points over the past two years [32] - Global impression volume grew approximately 22% year-over-year, although total eCPMs decreased by about 13% due to increased inventory from Sponsored Snaps [33] Company Strategy and Development Direction - The company aims to reach 1 billion monthly active users globally, with a focus on enhancing user engagement through new features and conversation starters [4][15] - Investments in augmented reality and generative AI are central to the company's long-term strategy, with significant user engagement in AR experiences [15][16] - The company is recalibrating investments in community growth and cost structures to improve financial efficiency [12][13] Management's Comments on Operating Environment and Future Outlook - Management anticipates potential declines in daily active users in Q4 due to internal and external factors, including regulatory changes and age verification initiatives [15][56] - The company remains committed to improving monetization efficiency and ensuring compliance with evolving regulations [15][56] - Management expressed confidence in the long-term growth potential, supported by a robust balance sheet and cash flow generation [37] Other Important Information - The company has authorized a new share repurchase program of $500 million to manage share count for long-term shareholders [40] - A partnership with Perplexity AI will integrate conversational search into Snapchat, expected to enhance user experience and generate revenue starting in 2026 [29][44] Q&A Session Summary Question: On the Perplexity partnership, is the cash stock split already determined? - Management indicated that the cash and stock split for the Perplexity partnership is not finalized and will depend on future developments [42][44] Question: How do you see Snap's role evolving as a distribution channel? - Management highlighted the opportunity to distribute AI agents through the chat interface and Sponsored Snaps, enhancing customer experiences [50][52] Question: Can you provide an update on direct response advertising growth? - Direct response revenue grew by 8% year-over-year, with strong performance in Europe and the rest of the world, while North America lagged [60][63] Question: What is the conviction level on keeping infrastructure costs flat next year? - Management expressed confidence in maintaining flat infrastructure costs through improved capacity utilization and cost structure optimization [66][67] Question: What is the latest thinking on Spectacles and potential financial partners? - Management did not provide specific updates on financial partnerships but emphasized the advanced AR software stack and its potential [69]

Financial Data and Key Metrics Changes - In Q3 2025, total revenue increased by 10% year-over-year to $1.51 billion, driven by improved advertising demand and the expansion of direct revenue streams [5][29] - Advertising revenue reached $1.32 billion, up 5% year-over-year, primarily due to growth in direct response advertising revenue, which increased by 8% year-over-year [29][30] - Adjusted EBITDA was $182 million, an improvement of $50 million compared to the prior year, with a net loss reduced by over 30% year-over-year to $104 million [6][36] - Free cash flow was $93 million in Q3, with a total of $414 million over the trailing 12 months [6][37] Business Line Data and Key Metrics Changes - Direct response advertising revenue increased by 8% year-over-year, with strong demand from small and medium-sized business customers [5][29] - Other revenue, including Snapchat Plus subscription revenue, surged by 54% year-over-year to $190 million [5][29] - The community reached 477 million daily active users, an increase of 34 million or 8% year-over-year [4] Market Data and Key Metrics Changes - Advertising revenue growth in Europe accelerated to 12% year-over-year, while the rest of the world saw a 13% increase [30] - North America advertising revenue grew only 1% year-over-year, with the SMB segment growing over 25% [30][31] - Global impression volume grew approximately 22% year-over-year, although total eCPMs decreased by about 13% due to increased inventory [32] Company Strategy and Development Direction - The company aims to reach 1 billion monthly active users globally and is focusing on enhancing user engagement through new features and conversation starters [4][7] - Investments in augmented reality and AI are prioritized, with plans to introduce new monetization tools and premium offerings [5][20] - The strategy includes recalibrating investments in community growth and optimizing cost structures to improve financial efficiency [11][12] Management's Comments on Operating Environment and Future Outlook - Management anticipates potential declines in daily active users in Q4 due to regulatory changes and internal initiatives [13] - The company remains committed to long-term growth despite short-term engagement headwinds, focusing on monetization efficiency and compliance with regulations [12][13] - Future revenue guidance for Q4 is set between $1.68 billion and $1.71 billion, implying year-over-year growth of 8%-10% [37] Other Important Information - The company has approximately $3 billion in cash and marketable securities, providing financial flexibility for future investments [6][37] - A new share repurchase program of $500 million has been authorized to manage share count for long-term shareholders [39] Q&A Session Questions and Answers Question: On the Perplexity partnership, is the cash stock split already determined? - Management expressed excitement about the Perplexity partnership, emphasizing its potential to enhance Snapchat's role as a messaging service and the unique opportunity to distribute AI agents through the chat interface [41][43] Question: Should we presume that the reason for the leverage in cost of revenue is due to not paying out to content owners? - Management clarified that the improvement in gross margins is attributed to a mix shift towards higher-margin ad formats like Sponsored Snaps and Spotlight, which have lower associated costs [42][46] Question: How do you see Snap's role evolving as a distribution channel? - Management highlighted the opportunity to open up the chat interface to more AI agents and conversational commerce experiences, indicating a strategic focus on enhancing customer engagement through these channels [47][49] Question: Could you talk about your conviction level on keeping infrastructure costs flat next year? - Management indicated a strong focus on improving capacity utilization and efficiency in infrastructure costs, aiming to maintain flat costs into 2026 [60][61] Question: What is the latest thinking on Spectacles and potential financial partners? - Management is preparing for the public release of Spectacles and is considering various options to accelerate technical leadership in the AR space, including establishing a standalone subsidiary for better flexibility [63]

Core Viewpoint - Snap is expected to report its first-quarter 2025 results on April 29, with anticipated revenues between $1.33 billion and $1.36 billion, reflecting a 12.73% increase year-over-year [1][2]. Revenue Expectations - The Zacks Consensus Estimate for Snap's revenues is currently at $1.35 billion, indicating a significant year-over-year growth [2]. - Adjusted EBITDA is projected to be between $40 million and $75 million for the quarter [2]. Earnings Projections - The consensus estimate for earnings remains at 4 cents per share, which represents a 33.33% increase from the previous year's 3 cents [3]. - Snap has surpassed the Zacks Consensus Estimate for earnings in three of the last four quarters, with an average positive surprise of 58.57% [3]. Factors Influencing Performance - Snap is expected to benefit from strong growth in its direct response advertising business, particularly in retail, gaming, and financial services [4]. - The Snapchat+ subscription service has seen its subscriber count double year-over-year to 14 million, contributing significantly to revenue growth [5]. - The rollout of Sponsored Snaps and Promoted Places is likely to attract more advertising spend, especially from small and medium-sized businesses [6]. Cost Considerations - Snap anticipates a year-over-year increase in adjusted operating expenses of 11-12%, driven by headcount growth, wage inflation, and higher legal costs [7]. - Infrastructure efficiencies are expected to help offset some of the increased costs, with management estimating lower infrastructure costs per daily active user [8]. Earnings Outlook - Snap currently has an Earnings ESP of -25.00% and a Zacks Rank of 3, indicating a lower likelihood of an earnings beat [9].