Snap (NYSE:SNAP) Beats Q1 Sales Targets But Stock Drops 13.8%

April 29, 2025 at 16:28 PM EDT

SNAP Cover Image

Social network Snapchat (NYSE: SNAP) announced better-than-expected revenue in Q1 CY2025, with sales up 14.1% year on year to $1.36 billion. Its GAAP loss of $0.08 per share was 40.3% above analysts’ consensus estimates.

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Snap (SNAP) Q1 CY2025 Highlights:

Revenue: $1.36 billion vs analyst estimates of $1.35 billion (14.1% year-on-year growth, 1.3% beat)
EPS (GAAP): -$0.08 vs analyst estimates of -$0.13 (40.3% beat)
Adjusted EBITDA: $108.4 million vs analyst estimates of $64.77 million (8% margin, 67.4% beat)
Operating Margin: -14.2%, up from -27.9% in the same quarter last year
Free Cash Flow Margin: 8.4%, down from 11.7% in the previous quarter
Daily Active Users: 460 million, up 38 million year on year
Market Capitalization: $14.98 billion

“We surpassed an important milestone in Q1, with our community growing to over 900 million monthly active users,” 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.

Sales Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Snap’s 7.8% annualized revenue growth over the last three years was tepid. This was below our standard for the consumer internet sector and is a poor baseline for our analysis.

This quarter, Snap reported year-on-year revenue growth of 14.1%, and its $1.36 billion of revenue exceeded Wall Street’s estimates by 1.3%.

Looking ahead, sell-side analysts expect revenue to grow 10.6% over the next 12 months, an acceleration versus the last three years. This projection is above the sector average and implies its newer products and services will fuel better top-line performance.

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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 10.4% annually to 460 million in the latest quarter. This growth rate is solid for a consumer internet business and indicates people are excited about its offerings. Snap Daily Active Users

In Q1, Snap added 38 million daily active users, leading to 9% 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 has been roughly flat over the last two years. 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. Snap ARPU

This quarter, Snap’s ARPU clocked in at $2.96. It grew by 4.7% year on year, slower than its user growth.

Key Takeaways from Snap’s Q1 Results

We were impressed by how significantly Snap blew past analysts’ EPS and EBITDA expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its free cash flow missed. Overall, we think this was a decent quarter with some key metrics above expectations. The market seemed to focus on the negatives, and the stock traded down 13.7% to $7.85 immediately following the results.

Is Snap an attractive investment opportunity at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.

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