Snap Revenue Soars With Users Stuck at Home -- Update
By Georgia Wells
Snap Inc. on Tuesday reported a surge in growth in users and
revenue in the first quarter, as homebound users turned to its chat
app for connection with friends amid the pandemic.
The results mark a surprise as many analysts estimate sharp
decreases in digital ad spending in the quarter, the first to show
the impact of the coronavirus crisis. As Snap is the first
social-media company to report results for the quarter, its
performance could bode well for heavyweights Facebook Inc. and
Alphabet Inc., which deliver earnings next week.
Communication with friends on the company's Snapchat app
increased by more than 30% in the last week of March compared with
the last week of January, the company said. In areas hardest hit by
the pandemic, communication with friends on Snapchat increased more
Following the first-quarter report, Snap shares jumped more than
19% in after-hours trading, almost wiping out the stock's losses
for the year.
The Santa Monica, Calif., company said its daily user base rose
11 million from the previous quarter to 229 million, marking the
fifth consecutive quarter of growth. Snapchat's ability to increase
its user count is crucial to attracting advertisers and revenue.
Analysts polled by FactSet had expected the user count to rise to
Snap's revenue rose 44% in the first quarter to $462.5 million,
up from $320.4 million a year earlier and significantly beating
analyst estimates of $430 million, according to FactSet.
"Snapchat is helping people stay close to their friends and
family while they are separated physically," Snap Chief Executive
Evan Spiegel said in prepared remarks.
On a call with analysts, Mr. Spiegel also attributed some of his
company's ability to increase its revenue to high growth rates in
the first two months of the quarter, which offset lower growth in
The results indicate that Snap may be well positioned despite
increasing uncertainty in the global economy.
"Snap seems to have been protected as it relies more on larger
advertisers," said Jim Cridlin, global head of innovation and
partnerships at Mindshare, a unit of global ad behemoth WPP. Those
larger advertiser budgets are more stable than small business
advertisers and their businesses are more likely to remain open, he
Nevertheless, the company didn't provide guidance for the second
quarter, citing the continuing pandemic and rapidly changing
economic conditions. In the past, Snap has provided forecasts for
revenue and adjusted earnings.
Mr. Spiegel said the pandemic has forced a shift to digital
behavior across every aspect of people's lives that could benefit
Snap. As people are sheltering in place, he said, their
communication, commerce, entertainment, fitness and learning habits
are forcing companies to shift to digital more quickly.
"We believe that this will accelerate the digital transformation
across many businesses, and that the heightened levels of activity
we are seeing today will lead to a sustained uplift in the digital
economy over time," Mr. Spiegel said.
Jeremi Gorman, Snap's chief business officer, said the company
has also shifted its sales team to focus on categories that are
faring better during the pandemic, such as gaming, home
entertainment, e-commerce and consumer packaged goods.
Still, Snap is far from profitable. Snap reported its loss
shrank slightly in the first quarter to $305.9 million, or 21 cents
a share, from $310.4 million, or 23 cents a share, in the same
period a year ago. Analysts polled by FactSet had expected a loss
of 20 cents a share.
In 2019, Mr. Spiegel had made it his company's "stretch" goal to
become profitable that year.
Write to Georgia Wells at Georgia.Wells@wsj.com
(END) Dow Jones Newswires
April 21, 2020 18:06 ET (22:06 GMT)
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