On February 4 (Reuters) - Snap exceeded Wall Street expectations for quarterly profit on Tuesday due to enhancements to the Snapchat parent company's advertising platform, causing its shares to rise by 6% in after-hours trading.
Analysts have noted that social media companies and advertisers are grappling with uncertainty regarding a potential ban on TikTok in the U.S., which could benefit Snap.
CEO Evan Spiegel mentioned during an earnings call, "The overall environment of uncertainty (around TikTok) is benefiting our business. Advertisers are very focused on contingency planning and diversifying their spend."
Spiegel also indicated that Snap might raise the price of its Snapchat+ subscription service to increase the average revenue per user, as Snapchat+ subscribers doubled to 14 million in the fourth quarter.
The company has been investing in artificial intelligence and machine learning tools to facilitate the creation of more personalized ads. Snap has concentrated on direct response ads aimed at prompting specific actions like app downloads or website visits, particularly as there is some weakness in brand awareness ads.
This strategic shift has enabled Snap to attract small and mid-sized businesses, which have become the largest contributors to the company's ad revenue growth in 2024.
Snap plans to introduce Sponsored Snaps - video ads that show up in users' inboxes - and Promoted Places, a feature that highlights business locations on Snap Map, in additional markets.
According to Jasmine Enberg, principal analyst at eMarketer, "Snap's diligent work on its ad platform and in diversifying its revenue streams through subscriptions have paid off."
For the fourth quarter ending on December 31, Snap reported adjusted earnings per share of 16 cents, surpassing analysts' average estimate of 14 cents based on LSEG-compiled data.
Snapchat's daily active users increased by 9% to 453 million, outperforming estimates of 450.8 million.
The company anticipates first-quarter revenue of $1.33 billion to $1.36 billion, with the midpoint slightly above estimates of $1.33 billion. It also projects adjusted EBITDA of $40 million to $75 million, below expectations of $78.1 million.
Revenue for the quarter surged by 14% to $1.56 billion, slightly surpassing the average estimate of $1.55 billion.