Snap’s first quarter results exceeded Wall Street’s expectations for both revenue and non-GAAP profitability, but management acknowledged several challenges that weighed on investor sentiment. CEO Evan Spiegel highlighted the company’s growing user base and improvements in direct response advertising and subscription businesses as key drivers. However, CFO Derek Andersen flagged softening brand advertising demand and ongoing macroeconomic uncertainty, particularly in North America, as areas of concern. Management emphasized the impact of changes to international trade rules on some advertisers and took a cautious approach to expense management, resulting in updated cost structure guidance.
Is now the time to buy SNAP? Find out in our full research report (it’s free).
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)
- Adjusted EPS: $0.08 vs analyst estimates of $0.04 (significant beat)
- Adjusted EBITDA: $108.4 million vs analyst estimates of $64.31 million (8% margin, 68.6% beat)
- Operating Margin: -14.2%, up from -27.9% in the same quarter last year
- Daily Active Users: 460 million, up 38 million year on year
- Market Capitalization: $13.9 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Snap’s Q1 Earnings Call
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Tom Champion (Piper Sandler) asked about the drivers of North American revenue acceleration and the evolution of Snap’s app design. CEO Evan Spiegel explained that advertiser performance, SMB momentum, and design iterations contributed to broad-based gains.
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Ross Sandler (Barclays) questioned the impact of macroeconomic headwinds on advertising and cost management. CFO Derek Andersen said the operating environment was uncertain, requiring careful expense prioritization and vigilance.
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Rich Greenfield (LightShed Partners) inquired about achieving 20% growth in direct response advertising. Spiegel noted the roadmap includes further ad platform improvements and new bidding objectives but declined to predict a specific timeline.
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Mark Shmulik (Bernstein) asked about the future of My AI and domestic engagement trends. Spiegel emphasized differentiation through visual and AR-based AI experiences and highlighted strong Spotlight content growth.
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Benjamin Black (Deutsche Bank) questioned North America user trends and confidence in restimulating regional growth. Spiegel acknowledged recent softness but cited ongoing investments in core product engagement and content as reasons for optimism.
Catalysts in Upcoming Quarters
In future quarters, our analysts will monitor (1) whether Snap can sustain direct response advertising momentum amid shifting advertiser demand, (2) the pace of growth in Snapchat+ subscriptions and new AR features, and (3) management’s ability to contain costs while investing in core technology. Developments in macroeconomic and regulatory environments will also be key factors to watch.
Snap currently trades at $8.32, down from $9.10 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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