Social network Snapchat (NYSE: SNAP) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 9.8% year on year to $1.51 billion. Its GAAP loss of $0.06 per share was 50.6% above analysts’ consensus estimates.
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Snap (SNAP) Q3 CY2025 Highlights:
- SNAP announced that Perplexity AI will pay the social media company $400 million over 1 year to integrate the artificial intelligence startup’s search features into Snapchat
- Revenue: $1.51 billion vs analyst estimates of $1.49 billion (9.8% year-on-year growth, 1% beat)
- EPS (GAAP): -$0.06 vs analyst estimates of -$0.12 (50.6% beat)
- Adjusted EBITDA: $182 million vs analyst estimates of $124.2 million (12.1% margin, 46.5% beat)
- Operating Margin: -8.5%, up from -12.6% in the same quarter last year
- Free Cash Flow Margin: 6.2%, up from 1.8% in the previous quarter
- Daily Active Users: 477 million, up 34 million year on year
- Market Capitalization: $12.62 billion
“Our focus on performance, creativity, and simplicity is helping advertisers achieve stronger results while giving our community more ways to communicate,” said Evan Spiegel, CEO.
Company Overview
Founded by Stanford University students Evan Spiegel, Reggie Brown, and Bobby Murphy, and originally called Picaboo, Snapchat (NYSE: SNAP) is an image centric social media network.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Snap grew its sales at a tepid 7.9% compounded annual growth rate. This was below our standard for the consumer internet sector and is a tough starting point for our analysis.
This quarter, Snap reported year-on-year revenue growth of 9.8%, and its $1.51 billion of revenue exceeded Wall Street’s estimates by 1%.
Looking ahead, sell-side analysts expect revenue to grow 9.7% over the next 12 months. While this projection suggests its newer products and services will spur better top-line performance, it is still below the sector average.
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Daily Active Users
User Growth
As a social network, Snap generates revenue growth by increasing its user base and charging advertisers more for the ads each user is shown.
Over the last two years, Snap’s daily active users, a key performance metric for the company, increased by 9.1% annually to 477 million in the latest quarter. This growth rate is solid for a consumer internet business and indicates people are excited about its offerings. 
In Q3, Snap added 34 million daily active users, leading to 7.7% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating user growth just yet.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns from the ads shown to its users. ARPU can also be a proxy for how valuable advertisers find Snap’s audience and its ad-targeting capabilities.
Snap’s ARPU growth has been mediocre over the last two years, averaging 3.5%. This isn’t great, but the increase in daily active users is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Snap tries boosting ARPU by taking a more aggressive approach to monetization, it’s unclear whether users can continue growing at the current pace. 
This quarter, Snap’s ARPU clocked in at $3.16. It grew by 2% year on year, slower than its user growth.
Key Takeaways from Snap’s Q3 Results
We were impressed by how significantly Snap blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. Importantly, Snap announced that Perplexity AI will pay the social media company $400 million over 1 year to integrate the artificial intelligence startup’s search features into Snapchat. The stock traded up 22.8% to $8.98 immediately following the results.
Sure, Snap had a solid quarter, but if we look at the bigger picture, is this stock a buy? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
