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Snap surprises with Q3 profit, huge revenue beat

Snap released its third quarter earnings report after hours on Tuesday, topping expectations on revenue and surprising investors with an adjusted profit. The company saw its daily active users near 250 million and a boost in digital ad spending. Yahoo Finance’s Ines Ferre breaks down the company’s earnings report on The Final Round.

Video Transcript

SEANA SMITH: We need to get to Snap because they are out with earnings. And the stock soaring here after hours. The shares up just around 16%. Ines, you've had some time here to go through this report. It looks like their third quarter revenue and also their daily active users here coming in better than what we were expecting.

INES FERRE: It sure has. Adjusted earnings per share coming in at $0.01, and the Street had been expecting a loss of $0.05 per share. Third quarter revenue came in as a beat as well, coming in at $678.7 million. The Street had been expecting it to come in at $559 million.

And daily active users, this is a metric which Wall Street really judges Snap by, 249 million. Also, beat. The Street had been expecting 244 million. The company said that they saw a rebound in digital ad spending.

And we had seen some Wall Street notes, some analyst notes ahead of these results, basically talking about ad spending, saying that ad spending would be better in the third quarter because of some July numbers in which it showed a 32% in sales expansion, just basically suggesting that the recovery is extending into the third quarter.

But certainly a beat all around, especially on those daily active users and revenue, a big revenue beat as well, Seana. The stock right now up 16% in after hours.

DAN ROBERTS: Guys, Snap has sort of almost arguably quietly just been killing it for a couple of quarters now. I mean, you know, in many ways, it's an example of one of those apps that if you're too much in your own bubble, you think that it isn't doing well.

Because anecdotally, you know, in my circles, clearly, I'm old. You know, my friends, we're not on there anymore, not using it. But look, daily active users up, as Ines mentioned. That's the highlight here. That's the headline, up 18%.

But man, I mean, all the bullet points here, we're seeing good news. Profitable quarter when profit wasn't expected. Now interestingly, Evan Spiegel leads the note by mentioning augmented reality. And he says that AR is moving more quickly than expected.

So I hope it's going to be something more exciting than the dancing hot dog, which was the early example from Snap. But I would interpret that as pretty soon, you're going to start to see Snap embracing AR in a more obvious way.

JEN ROGERS: I think a lot of it's about engagement here. The average number of snaps created every day grew 25% year over year. And just in terms of engagement, Dan, we've been talking a lot about what's been happening with sports. They call out here SportsCenter viewership on Snapchat increased by 80% from July to September. This is not just a bunch of kids sending each other messages. This is old line media making new inroads and Snap actually making money.

SEANA SMITH: And going after Gen Z and the millennials, the audience that they are looking to capture here, a lot of the audience here that's cutting the cord. So they're needing to find other ways to reach them. So clearly, working here for Snap, at least.

That stock up just around 18% right now, so continuing here to trend to the upside. Twitter also following suit. Twitter stock up 3% here after hours. Netflix, though, a totally different story, with that stock off nearly 6%. Of course, the miss there on Q3 subscriber add.