Snap posts first ever better than expected earnings

By : |February 7, 2018 0

After waiting for it forever, Snapchat parent company, Snap finally posted its first ever better than expected earnings for Q4 2017.

Snap’s fourth quarter earnings were significantly higher than Wall Street expectations, with sales of $285.7 million, or a 72 percent increase over the same time a year ago, and a net loss of $350 million. Shares skyrocketed about 26 percent in after-hours trading.

Snapchat added 8.9 million daily active users, to reach 187 million, with a quarter-over-quarter growth rate of 5.05 percent percent in Q4, compared to 2.9 percent in Q3. That makes for a DAU growth of 18 percent year-over-year, compared to Facebook’s 14 percent.

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Snap debuted on the New York Stock Exchange in March 2017, and a string of poor results, and constant competition from Facebook and Instagram, has seen the company not trade above its IPO price since July. In a letter to investors, Evan Spiegel laid out the case for Snap’s willingness to respond to increased competition from Facebook and Snapchat’s growth struggles.

He also spoke about Snapchat’s redesign. “Additionally, we believe that the redesign has also made our application simpler and easier to use, especially for older users,” Spiegel wrote. “Compared to the old design, core metrics around content consumption and time spent in the redesigned application are disproportionately higher for users over the age of 35, which bodes well for increasing engagement among older users as we continue to grow our business.”

Snap is still struggling massively to bring its revenue up to par with expenses. This quarter, it cost $646 million to generate $286 million in revenue. Expenses were up 93 percent over the same period last year. One of its biggest expenses is the cost of supporting streaming photos and videos—the bulk of the functionality of Snapchat—which Snap said in its earnings presentation accounted for $131 million in costs in this quarter alone.

Spiegel has recently hinted towards some big changes including Snapchat’s growth beyond its mobile application — a nod to the company’s recent decision to make certain Stories viewable on the web. “We feel strongly that Snapchat should not be confined to our mobile application — the amazing Snaps created by our community deserve wider distribution so they can be enjoyed by everyone,” Spiegel wrote. “Our work during 2017 is proof that we aren’t afraid to make big changes for the long-term success of our business.”

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