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- Snap’s shares climbed by 10% after exceeding Wall Street revenue forecasts for the third quarter.
- The company’s revenue rose by 15%, reaching $1.37 billion, surpassing analyst predictions of $1.36 billion.
- This growth was driven by advancements in AI features and an increase in Snapchat+ subscribers.
In after-hours trading, Snap saw a notable 10% rise in its stock price following the release of its third-quarter financial results, which outperformed analyst expectations due to the introduction of various artificial intelligence functionalities and an uptick in paid user subscriptions.
Renowned for its photo-messaging capabilities, Snap reported a year-on-year revenue increase of 15%, totaling $1.37 billion—slightly above analysts’ forecasts that estimated revenues at $1.36 billion.
Evan Spiegel, CEO of Snap, highlighted that initiatives aimed at enhancing user engagement—such as AI-generated collage tools and machine learning applications for improved personalization—are beginning to yield positive results.
Spiegel also mentioned that new AI resources have been developed specifically for content creators, whom the company has been actively encouraging to join their platform recently.
“In Q3, we initiated trials for an innovative AI video creation tool that allows creators to produce captivating videos using simple text or image prompts,” Spiegel stated during Tuesday’s earnings call. ”Our commitment to supporting creators has led to approximately a 50% year-over-year growth in content posted by creators during Q3.”
The platform added 11 million daily active users over the third quarter—a significant year-on-year growth rate of 9%. However, projections indicate only an additional gain of about 8 million users this quarter, bringing total daily active users to approximately 451 million.
The metric known as daily active users is crucial as it reflects user engagement levels with social media platforms; higher engagement typically correlates with increased advertising revenue opportunities.
AI Innovations and Paid Subscriptions Fueling Snap’s Growth
The CEO further credited part of this revenue surge to their subscription services model.
Launched in response to declining ad revenues back in 2022, Snapchat+ is priced at $3.99 per month and reached a milestone of 12 million subscribers during Q3. This figure represents more than double the number from last year and contributed roughly $123 million towards quarterly revenues.
Additionally, Snap has revamped its advertising strategy over recent years; shifting focus from brand awareness campaigns towards more costly direct-response advertisements designed with clear calls-to-action aimed at driving product purchases or website visits from users.
Despite these positive developments impacting Snap’s performance metrics positively, it continues facing challenges reflected through consistent losses—including a reported loss amounting to $153 million this past quarter alone—and overall losses totaling around $368 million for Q3 alone this year.
Sitting at around 443 million total users pales compared with Meta’s staggering count exceeding three billion or TikTok’s impressive base surpassing one billion—both representing fierce competition within ad market share dynamics against which Snap must contend directly.
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