Snap stock falls 10% as quarterly revenue lands below forecast

Snap Inc. shares declined more than 10% on Wednesday following the release of third-quarter financial results that fell short of Wall Street projections for both revenue and daily engagement.

The social media company reported revenue of $1.72 billion, missing the $1.73 billion average analyst estimate compiled by LSEG. Global daily active users stood at 495 million, compared with the 499 million projected by StreetAccount. Despite the miss in top-line growth and user counts, the company posted earnings per share of 3 cents. This figure was not directly comparable to analyst estimates.

The quarter marked a financial turnaround for the firm. Snap recorded a net income of $56 million, reversing a net loss of $104 million in the same period of the prior year. Revenue grew 14% year-over-year. Adjusted earnings reached $383 million, surpassing the $337 million analysts had predicted. Global average revenue per user held steady at $3.48, in line with forecasts.

Management provided a fourth-quarter revenue outlook between $1.95 billion and $1.99 billion. The midpoint of this range exceeds the current consensus estimate of $1.95 billion. For adjusted earnings in the final quarter, the company projects a range of $490 million to $525 million, while analysts had forecast $498 million.

In an investor letter, executives announced a strategic shift in how the company measures its audience. Beginning in the first quarter of 2027, global monthly active users will serve as the primary audience metric. Snap reported 977 million monthly active users for the current quarter. The letter stated that daily engagement has historically been stable as a percentage of monthly engagement. The company said it does not intend to optimize Snapchat around daily use at the expense of long-term value for its community.

Ronan Harris, the company's chief commercial officer, addressed analysts on an earnings call regarding the revenue miss. He noted that reduced spending by consumer packaged goods companies weighed on third-quarter sales. Harris attributed this pullback to macro pressures in the United States and the Middle East, though he did not name specific advertisers. He added that the company sees positive signs of growth in diversified verticals, such as financial services in the U.S., as part of its strategy to find traction outside of consumer packaged goods.

The stock price movement followed the close of the third quarter, which ended in September. The shift to monthly metrics and the focus on long-term utility were detailed in the correspondence sent to shareholders alongside the financial report.