Revenue for Snap surpasses expectations in Q1, Snapchat surpasses 900 million monthly users, but the company withholds future growth projections due to economic unpredictability
In the tech world, Snap Inc., the parent company of Snapchat, has announced its Q2 2025 financial results. The company is experiencing a 9% year-over-year revenue growth, reaching $1.345 billion, driven by increased monthly active users (7% increase) and daily active users (9% increase).
Despite this revenue growth, Snap reported a net loss of $263 million, slightly wider than the prior year, and a decline in adjusted EBITDA to $41 million from $55 million last year. These figures reflect ongoing investment in AI and augmented reality technologies, as well as competitive pressures in the market.
Snap's advertising platform has shown significant improvements, with purchase volume for commerce advertisers increasing by 39% year over year, and total purchase-related ad revenues growing over 25%. The Sponsored Snaps ad format was notably effective, delivering up to 22% higher conversion rates and an 18% increase in unique converters across app installs and in-app purchases.
However, the company missed some revenue expectations, indicating ongoing competitive and market challenges. Quarterly revenue for Snap increased 14% year-over-year, driven by direct-response advertising solutions, SMB growth, and the Snapchat+ subscription business.
Operationally, costs rose with adjusted cost of revenues increasing 11% and research and development expenses rising 18.9%. Sales and marketing expenses decreased slightly, while operating cash flow improved significantly to $88 million, contributing to positive free cash flow of $24 million for the quarter.
Notably, Snapchat added 7 million daily active users to reach 460 million in Q1. The growth of the Snapchat+ subscription product contributed to the growth of "other revenue" for the company, which grew 75% year-over-year to reach $152 million in Q1, with an annualized run rate of over $600 million.
Snap Inc. has reached 900 million monthly active users globally in Q1, a significant milestone for the company. However, the company did not provide specific details about its Q2 financial outlook due to macroeconomic uncertainty and potential impact on advertising demand.
Shares of Snap fell more than 12% in after-hours trading after the Q1 report, reflecting investors' concerns about the company's financial performance and outlook. Despite these challenges, Snap continues to balance investment and revenue growth, aiming to capitalise on the opportunities presented by the growing user base and enhanced ad sales performance driven by AI advancements.
- Snap's ongoing investment in AI and augmented reality technologies, coupled with its efforts in entertainment, could potentially lead to business expansion beyond finance and technology.
- In the midst of rising costs and competitive pressures in the business sector, Snap's revenue from entertainment sources like the Snapchat+ subscription product is showing significant growth, contributing to overall company earnings.
