Snap shares rose 25% on strong earnings and strong revenue growth

pause It reported first-quarter results Thursday, which beat analysts’ expectations and revenue growth returned to double digits. Shares rose more than 25% in after-hours trading.

Here’s what the company does:

• Earnings per share: 3 cents adjusted, while LSEG expected a loss of 5 cents
• Income: US$1.19 billion compared to US$1.12 billion expected by LSEG
• Daily active users worldwide: 422 million vs. 420 million expected, according to StreetAccount
• Average revenue per user: StreetAccount expected $2.83, expected $2.67

Snap’s first-quarter revenue rose 21% from $989 million in the same period last year. The company previously reported six consecutive quarters of single-digit growth or sales declines, but is now accelerating.

Snap has been working to rebuild its ad business after the digital ad market declined in 2022, and it’s starting to pay off. Snap said in its investor letter that revenue growth was primarily driven by improvements in the company’s advertising platform and demand for its direct-response advertising solutions.

Advertising revenue was $1.11 billion in the first quarter. Snap’s “other revenue” segment, driven primarily by Snapchat+ subscribers, reached $87 million, up 194% year over year. Snap reported more than 9 million Snapchat+ subscribers during this period.

According to StreetAccount, first-quarter adjusted EBITDA was $46 million, beating analysts’ expectations for a loss of $68 million. Snap said in its investor letter that adjusted EBITDA “exceeded our expectations,” largely driven by operating expense discipline and accelerated revenue growth.

“Given the progress we’ve made on our advertising platform, the leadership team we’ve built, and the strategic priorities we’ve set, we believe we’re well-positioned to improve the performance of our business,” Snap wrote in the letter.

Even as Snap’s growth accelerates, it still lags YuanOn Wednesday, the company reported better-than-expected first-quarter revenue growth of 27%. Mater’s stock price fell anyway after the company issued a bleak forecast and dazzled investors with long-term investment talks.

Snap’s net loss for the quarter narrowed to $305.1 million, or 19 cents per share, from $328.7 million, or 21 cents per share, a year earlier.

Snap expects second-quarter revenue to be between $1.23 billion and $1.26 billion, according to StreetAccount, higher than analysts’ expectations of $1.22 billion. Snap said adjusted EBITDA would fall from $15 million to $45 million, compared with Wall Street expectations of $15.5 million.

Snap reported 422 million daily active users (DAU) in the first quarter, up 10% year over year. The company expects daily active users to reach about 431 million in the second quarter, higher than StreetAccount’s forecast of 430 million.

The company also provided a forecast for its full-year 2024 cost structure. Snap said quarterly infrastructure costs per DAU for the rest of the year will drop from 83 cents to 85 cents.

“We will continue to evaluate our level of infrastructure investment based on the best long-term interests of our business,” Snap said

Snap said the amount of time users spend watching content has increased year-over-year, largely due to the participation of Spotlight and Creator Stories. The company said time spent watching Spotlight, which aggregates user content, grew 125% year over year.

In February, Snap announced that it would lay off 10% of its global workforce, accounting for about 500 employees. The company said on Thursday that headcount and personnel costs will increase “modestly” for the rest of the year.

Snap will hold its quarterly conference call with investors on Thursday at 5:30 p.m.