To The Moon

$Snap Inc(SNAP)$ plummeted 23% after the earnings report as both the quarterly results and full-year guidance fell short of market expectations, in stark contrast to the previous day's industry leader, $Meta Platforms, Inc.(META)$ .

Q2 Reviews

Active Users: Daily Active Users (DAUs) grew 9% to 432 million, slightly higher than the 431.2 million expected; Monthly Active Users (MAUs) surpassed the 850 million mark, demonstrating the continued expansion of the user base.

Revenue: reached $1.237 billion, achieving 16% revenue growth, but still below Wall Street analysts' expectations of 17% growth,.

Advertising business performance: Snap's advertising business continued to perform well, with the number of active advertisers more than doubling year-on-year, so there was a significant decline in terms of average spending by individual advertisers, implying that advertisers tend to be cautious in their spending, and perhaps challenged with the effectiveness of their advertising.

Profitability: Net loss narrowed to $248.6 million from $377.3 million a year ago; adjusted EBITDA turned around to a positive $54.98 million from -$38.48 million a year ago, an improvement that could be attributed to the scale effect of the ad platform and cost control measures.

Cash flow: operating cash flow improved to -$21 million from -$82 million a year ago, and free cash flow improved to -$73 million from -$119 million, due to narrower losses

Earnings Guidance.

• Snap expects revenue for Q3 2024 to be between $120 million and $130 million, below the market consensus estimate of $130 million.

• Adjusted EBITDA is expected to be between $70 million and $100 million, also below market expectations of $100 million.

• Meanwhile, the company did not provide specific full-year revenue guidance, but stressed that it will continue to focus on user growth and optimization of its advertising business.

Investment highlights

Advertising revenue growth of 10% was lower than overall revenue growth, why ?

By type, direct response (DR) advertising revenue grew 16%, while brand advertising revenue declined 1%, primarily due to weak demand in consumer discretionary income categories (e.g., retail, tech, entertainment) and changes in holiday timing that impacted brand advertising.The company highlighted strong performance in DR advertising, with the number of active advertisers doubling year-over-year.Meanwhile, revenue growth of 12% in North America was lower than other regions, as North America was more affected by weak demand for brand advertising.

The user base expanded, surpassing 850 million monthly active users, providing a larger audience for the advertising business.

AI technology development has and boost for the company?

The company launched Lens Studio 5.0, which includes GenAI Suite, making it easier for creators to make AR filters.Meanwhile, AR ads are highly effective, with AR ads combined with video ads increasing ad awareness by 1.6x.In addition, the company introduced 7-0 optimization, improved app installation experience, and extended conversion API integration, which significantly improved advertising effectiveness, such as Ridge achieving 73% higher ROAS, and gaming apps such as Roblox achieving 30-50% ROAS improvement.

Active Users

Q2 other revenues, primarily Snapchat+ subscription revenues, grew 151% year-over-year to $105 million.Snapchat+ subscriptions reached 11 million users, showing progress in diversifying revenue streams.

Profitability.

While EBITDA turned positive, third-quarter guidance was below expectations, suggesting that the company may need to find a balance between advertising revenue growth and margins.