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Snap's quarterly users, revenue pop, but declines Q2 guidance amid coronavirus effect

Snap (SNAP), the parent company of photo-sharing app Snapchat, reported first-quarter user growth that exceeded consensus expectations, as stay-in-place orders from the coronavirus pandemic bolstered user activity.

During the first quarter, Snap’s daily active users grew by 11 million to 229 million, representing a 20% jump over the same period last year and a 5% rise over last quarter. The report sent the company’s shares on a tear Wednesday morning, adding more than 22% from Tuesday’s closing levels to trade at more than $15 per share.

Here were the main results from the report, compared to consensus estimates compiled by Bloomberg:

  • Revenue: $462.5 million vs. $420.8 million expected

  • Adjusted loss per share: 8 cents vs. 8 cents expected

  • Daily active users (DAU): 229 million vs. 223.8 million expected

  • Average revenue per user (ARPU): $2.02 vs. $1.87 expected

In this Monday, July 30, 2019 photo, the social media application, Snapchat is displayed on Apple's App Store. (AP Photo/Amr Alfiky)

Snap joined a host of other companies in declining to provide guidance because of the COVID-19 crisis, and said it would not be providing its expectations for revenue or adjusted EBITDA for the second quarter.

Wall Street anticipated mixed results from Snap as the outbreak and social distancing measures contributed to shifts in both user and advertiser behavior. User engagement was expected to rise as more people stayed at home and turned to digital pastimes.

Yet advertising revenue was expected to weaken, as business activity crippled by the outbreak forces companies to cut down on ad and marketing costs.

Snap’s results largely reflected these expectations. Snap CEO Evan Spiegel said in prepared remarks that users over the age of 35 watching Snap’s Discover content doubled over last year in the first quarter. Meanwhile, Snap’s Lenses, or augmented reality camera filters, saw an 85% increase in usage each day versus last year, Spiegel said.

“We believe that the recent acceleration in the adoption of communication technology and augmented reality during these travel restrictions will help support our longer-term trends in engagement growth,” Spiegel said.

While user growth was strong, Spiegel noted that the company saw “lower growth in March” for advertising revenues, which partially offset increases in the first two months of the quarter. Snap’s $462.5 million in revenue represented a 44% jump over last year, slowing from the prior quarter’s 50% pace of increase.

POLAND - 2020/03/23: In this photo illustration a Snapchat logo seen displayed on a smartphone. (Photo Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)

In a note published last week, Cowen analyst John Blackledge said he expected industry-wide U.S. ad revenue would drop 11% from last year to $212 billion in 2020, with this decline rippling across a host of digital ad-dependent companies including Facebook (FB), Alphabet (GOOG, GOOGL), Snap (SNAP) and Twitter (TWTR).

Still, Blackledge said Snap was “well positioned to gain market share over time given positive secular trends, strong engagement and low ARPU” relative to other social platforms.

Snap could also see longer-term strength following the roll-out of its revamped Android app across more geographies, improving the user experience and driving engagement across a broader base, according to Credit Suisse analyst Stephen Ju. Plus, Snap is “a scarce asset that offers advertisers access to a coveted younger demographic,” he added.

Snapchat was the “favorite” social media platform among teens, edging out contenders including Facebook-owned Instagram, TikTok, Twitter and Pinterest, according to an April report from Piper Sandler surveying 5,200 individuals with an average age of 16.2 years. Snapchat was second to Instagram in frequency of usage, according to the report.

Shares of Snap have been down about 22% for the year to date, faring worse than the broader market’s 14.6% decline.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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