Snap has had a rocky couple of years: several quarters of flat growth or declines, struggles with the digital ad market, numerous rounds of significant layoffs (the latest of which was just two months ago and cut 10% of the company’s workforce), and issues with growing newer initiatives like its subscription service Snapchat+.
But things might be turning around (at least, for executives and shareholders). Snap posted first-quarter revenues of $1.19 billion–well above analyst expectations, and a 21% year-over-year growth from Q1 2023.
A full $1.1 billion of that revenue was brought in by digital advertising, which has been a tough point for Snapchat since the post-COVID-digital-ad-frenzy decline in 2022. In its investor letter, Snap credited improvements to its advertising platform, including implementing machine learning and putting more emphasis on direct-response ads, for the growth in ad revenue.
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“Given the progress we have made with our ad platform, the leadership team we have built, and the strategic priorities we have set, we believe we are well positioned to continue to improve our business performance,” Snap wrote in the letter.
CFO Derek Andersen added that the company is seeing a “much more robust brand environment” across all geographical regions.
Snap also said it saw an 85% increase in the number of advertisers who classify as “small” and “medium,” so it’s getting more small biz traffic as well as big brands.
The next biggest share of earnings, $87 million, came from Snap’s “Other Revenue” category, which includes Snapchat+ subscribers. Snap said Snapchat+ (which costs $3.99/month and includes access to “exclusive, experimental, and pre-release features,” but unlike competing platforms’ paid tiers, doesn’t remove ads) now has more than 9 million subscribers.
As for how many total users Snapchat has, it’s now up to 422 million DAUs, a 10% growth from Q1 2023.
Snap thinks it’ll grow to 431 million DAUs in Q2, and expects it’ll report between $1.23 and $1.26 billion for the quarter. Per CNBC, that’s above what’s expected by analysts, but since Snap earnings beat analyst expectations this quarter, it’s possible they’ll continue that upward trend.
Investors seem to think so: after Snap posted these earnings, shares jumped a whopping 25%.
