Snap Inc (NYSE: SNAP), the parent company of Snapchat, reported second-quarter 2026 results on Monday after the closing bell that surpassed market expectations for both revenue and earnings. The company also issued an optimistic outlook for the third quarter. In reaction, shares surged more than 13% in after-hours trading, providing a sharp relief after a 37% decline year-to-date.
For the quarter ended June 30, Snap posted revenue of $1.6 billion, a 19% year-over-year increase and well above the analyst consensus estimate of $1.54 billion. The core advertising business, which contributes the majority of total revenue, grew 9% to $1.28 billion. The "Other Revenue" category, which includes the Snapchat+ subscription service, surged 85% year-over-year to $316 million. Net loss narrowed to $164 million from $262.6 million in the same period last year. Adjusted profit reached $250 million, significantly beating the market estimate of $192 million. Global average revenue per user (ARPU) rose to $3.25, also above the $3.16 forecast.
Drivers for Ad Recovery: World Cup and Large North American Clients
The robust performance in advertising was largely fueled by spending related to the FIFA World Cup and a notable improvement in advertising momentum from large North American clients. Chief Executive Officer Evan Spiegel, in a letter to shareholders, noted, "After several quarters of improving our ad products and market strategy, we are seeing positive momentum with large North American advertisers, along with stronger international revenue growth." He specifically highlighted that World Cup ad expenditure contributed to the quarter’s results, while small and medium-sized businesses continued their steady growth trajectory. This marks a clear shift from the prior quarter's commentary in May, where Snap warned that large North American advertisers were a headwind and cited the Middle East conflict as a source of uncertainty. In this report, the company omitted any mention of geopolitical headwinds, instead emphasizing that direct-response ads and AI-powered tools for automated bidding, budget management, and user targeting are increasingly attracting advertisers.
Mixed User Growth and Regulatory Pressures
On user metrics, Snap reported 493 million global daily active users (DAU) for the quarter, an increase of roughly 5% year-over-year, matching the growth rate of the previous two quarters and beating the consensus estimate of 488 million. However, growth was geographically uneven. In the critical North American market, DAU declined nearly 7% year-over-year to 92 million, while Europe also saw a drop of about 2%. Spiegel revealed that the U.S. domestic user base grew sequentially, driven by users aged 35 and older. He also credited new features like the Spotlight short-video function for boosting engagement. After experiencing its first-ever user decline at the end of 2025, Snap has shown resilience with a return to growth in the first half of 2026. Nevertheless, Snap expressed deep concern over the increasingly severe global regulatory and legal environment. Spiegel and newly appointed Chief Financial Officer Doug Hote warned that this situation "could materially impact the company's business and financial performance." In December 2025, Australia enacted a ban on social media use for children under 16, covering Snapchat. Last month, France became the first EU member state to implement a similar ban. In the U.S., Snap faces multiple high-profile lawsuits alleging that it intentionally designed addictive products causing harm to minors. While Snap has settled three closely watched cases this year, it still faces several trials in 2026. "We are closely monitoring the regulatory environment, including requirements around age verification, privacy, and online safety, which could affect the product experience or, over time, our user growth and engagement," Spiegel stated.
Betting on AR Glasses to Build 'the Next Computing Platform'
While tech giants are pouring hundreds of billions of dollars into AI models and data centers, Snap is charting a different path. Spiegel is firmly betting the company's long-term future on augmented reality (AR) glasses. Snap spun out this business into a separate subsidiary in January. In June, it launched its first AR glasses for consumers, named "Specs," priced at $2,195 with a $200 refundable deposit. Shipments are planned for later this year, with an official launch event scheduled for September 16 in Los Angeles. Spiegel called Specs "our biggest long-term opportunity" in the shareholder letter, noting that users do not need a Snapchat account to use the device, which could help the company reach a new user base. On an analyst call, responding to skepticism about Snap's resource gap compared to giants like Meta Platforms Inc (NASDAQ: META), Spiegel cited Snapchat's own success in a crowded social media market, saying, "The long-term opportunity to develop the next computing platform is absolutely enormous... Our position as a first mover is what makes this opportunity unique." At the same time, he sought to temper concerns about over-investment, projecting that mass consumer adoption of such devices is not expected until "the end of this decade." He promised, "We are approaching this investment with great discipline, currently focusing on customer experience, product quality, and ecosystem building." While pursuing its long-term vision, Snap has not relaxed short-term profitability discipline. In April, the company announced a 16% workforce reduction to cut costs. New CFO Hote said the layoffs will generate over $500 million in annualized cost savings, which "should be more fully reflected in financial results in the third quarter and beyond," partly due to AI tools improving employee productivity. To support ad revenue growth, Snap raised its full-year infrastructure spending guidance by $50 million to a range of $1.65 billion to $1.7 billion to cover additional AI and machine learning investments.
For the current quarter, Snap provided an optimistic outlook: third-quarter revenue is expected to be between $1.7 billion and $1.74 billion, with the midpoint above the analyst estimate of $1.7 billion. Adjusted profit is forecast at $300 million to $350 million, with the $325 million midpoint slightly below the $327 million consensus. Snap's strong report contrasts with the recent struggles of its social media peers. Last week, Reddit Inc (NYSE: RDDT) shares fell after it reported "uneven" search referral traffic despite beating revenue and profit expectations, raising user growth concerns. Meta also saw its stock decline after issuing a weaker-than-expected sales outlook, with its massive AI spending eroding free cash flow.
Comments