Snap Inc. delivered a stronger-than-expected second-quarter performance, propelled by elevated advertising spending during the FIFA World Cup and improving demand from large North American advertisers. The company also issued a revenue forecast for the current quarter that exceeded Wall Street's expectations, sending shares up more than 7% in extended trading.
The social media firm has been investing heavily in AI-powered advertising tools to enhance automated bidding, budget allocation, and audience targeting, while sharpening its focus on direct-response advertising to better compete in a crowded digital ad market. These efforts appear to be gaining traction, according to CEO Evan Spiegel.
"After several quarters of improving our ad products and go-to-market approach, we saw better momentum with large advertisers in North America," Spiegel said. "The World Cup-related spending contributed during the quarter, alongside continued strength among small- and medium-sized businesses."
Revenue for the quarter ended June 30 came in at $1.60 billion, up roughly 19% year over year and above the $1.54 billion analysts had projected, according to LSEG data. The company's net loss narrowed to $164 million, or 16 cents per share, from $262.6 million a year earlier. Adjusted earnings reached $250 million, comfortably surpassing the $192 million consensus estimate from StreetAccount.
The upbeat results follow a May update in which Snap noted that large advertisers in North America were still a drag on growth, though it saw early signs of improvement. That improvement now appears to be materializing, with the company projecting third-quarter revenue between $1.70 billion and $1.74 billion, the midpoint slightly above analysts' $1.70 billion forecast. Adjusted EBITDA guidance of $300 million to $350 million brackets the $329.9 million expected.
Snap said it continues to invest in AI and machine-learning infrastructure to support future growth, raising its full-year infrastructure cost guidance by $50 million to a range of $1.65 billion to $1.7 billion. The company's "other revenue" segment, which includes its Snapchat+ subscription service, surged 85% year over year to $316 million, underscoring its push to diversify beyond advertising.
Despite the strong quarter, Snap faces intense competition from larger rivals like Meta Platforms, parent of Facebook and Instagram. Shares remain down roughly 37% this year. Global daily active users rose about 5% year over year to 493 million, matching the growth pace of the prior two quarters, but regional trends were mixed. North America saw a nearly 7% year-over-year decline to 92 million users, while Europe slipped about 2%.
On the earnings call, Spiegel highlighted improvements in Snap's core messaging experience and the continued expansion of Spotlight, its short-video platform, as key drivers of overall user growth. The company also said it is monitoring the evolving legal and regulatory landscape, which could materially affect its business.
Looking ahead, Snap plans to provide more details about its augmented reality glasses, Specs, at a launch event in Los Angeles on September 16. The consumer version, unveiled in June, starts at $2,195. The company's AI-driven ad tools and subscription growth are central to its strategy as it navigates a competitive market, with AI-driven rallies in tech stocks underscoring investor interest in companies leveraging artificial intelligence.
Snap's performance also comes amid a broader trend of AI-driven demand boosting earnings across sectors, though the company's user metrics remain a watchpoint. The company's ability to sustain advertiser momentum will be key, especially as it faces headwinds from platform changes and privacy regulations.
This article is for informational purposes only and does not constitute financial advice.
