Third-quarter outlook tops expectations as advertiser demand strengthens, though user declines in North America and Europe highlight ongoing competitive pressures
Snap delivered stronger-than-expected second-quarter results on Monday, buoyed by a surge in advertising spending linked to the FIFA World Cup and improving demand from major brands in North America.
The results provide fresh evidence that the social media company’s investments in artificial intelligence-powered advertising tools are beginning to pay off.
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The Snapchat parent posted second-quarter revenue of $1.60 billion for the three months ended June 30, a 19% increase from a year earlier and above analysts’ average estimate of $1.54 billion, according to LSEG data. The better-than-expected performance prompted investors to send the company’s shares up about 13% in extended trading.
The results suggest Snap is making progress in rebuilding its advertising business after several years of grappling with weaker digital ad spending, Apple’s privacy changes that made targeted advertising more difficult, and intense competition for advertisers from larger rivals, particularly Meta.
Advertising remains Snap’s primary source of revenue, making the company’s ability to attract marketing budgets a closely watched indicator of its financial health. Its latest performance points to a combination of seasonal sporting events and product improvements helping it win a larger share of advertisers’ spending.
Snap has spent the past several quarters strengthening its direct-response advertising business, an area that enables advertisers to measure consumer actions such as purchases, app downloads and website visits. The company has also integrated artificial intelligence across its advertising platform, offering automated bidding, budget optimization and audience-targeting tools designed to improve campaign performance and increase returns for marketers.
“After several quarters of improving our ad products and go-to-market approach, we saw better momentum with large advertisers in North America,” Chief Executive Evan Spiegel said.
“The World Cup-related spending contributed during the quarter, alongside continued strength among small- and medium-sized businesses.”
The comments suggest Snap intends to broaden its advertiser base. While multinational brands typically account for larger advertising budgets, small and medium-sized businesses have become an important source of recurring revenue as digital advertising platforms improve automated campaign management through AI.
The company continues to face formidable competition from Meta, whose Facebook and Instagram platforms dominate the global digital advertising market through their scale, extensive user base and sophisticated advertising infrastructure. Competition has intensified as both companies deploy artificial intelligence to improve ad targeting and campaign efficiency.
Snap’s shares had fallen roughly 37% this year before the earnings announcement, revealing investor concerns over slowing user growth in mature markets and uncertainty surrounding the pace of advertising recovery. The company reported 493 million daily active users during the quarter, representing a 5% increase from a year earlier and maintaining the same growth rate recorded in each of the previous two quarters.
The regional picture, however, remained uneven.
Daily active users in North America declined nearly 7%, while Europe recorded a roughly 2% decrease, suggesting user growth is increasingly being driven by emerging markets. Although these regions contribute lower average revenue per user than North America, they continue to expand Snapchat’s global audience and provide longer-term monetization opportunities as advertising markets mature.
The decline in users across Snap’s highest-revenue regions also points to the challenge of sustaining engagement in markets where competition for consumers’ attention has intensified. Platforms including Instagram, TikTok and YouTube continue to compete aggressively for user engagement, content creators and advertising budgets.
Looking ahead, Snap forecast third-quarter revenue of between $1.70 billion and $1.74 billion. The midpoint of that range came in slightly above analysts’ consensus estimate of $1.70 billion, indicating management expects advertising demand to remain resilient through the current quarter.
The company projected adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of between $300 million and $350 million, compared with analysts’ estimate of about $329.9 million, suggesting continued operating leverage as revenue growth outpaces expense increases.
Beyond advertising, Snap is pressing ahead with its long-term augmented reality ambitions.
The company said it will provide additional details about its next-generation augmented reality glasses, Specs, during a launch event in Los Angeles on September 16. The consumer device, unveiled in June with a starting price of $2,195, is Snap’s latest effort to establish itself in wearable computing, an emerging market where technology companies are investing heavily in anticipation that AR devices could eventually become a major computing platform.
At the same time, Snap cautioned that it continues to monitor an evolving legal and regulatory landscape that could materially affect its business, reflecting growing global scrutiny of social media companies over issues including user privacy, online safety, competition and artificial intelligence.
The combination of stronger advertising demand, improving AI-driven monetization tools and an upbeat revenue outlook offered investors reassurance that Snap’s turnaround efforts are gaining momentum. However, declining user numbers in North America and Europe indicate the company must continue finding new ways to deepen engagement and defend its market position.