Snap (SNAP) reported fiscal first-quarter results that exceeded expectations, reflecting still-strong revenue and user growth amid ad product improvements and heightened engagement during the pandemic. However, the company's adjusted EBITDA loss forecast for the current quarter came in weaker than expected. Shares fell 3.5% in late trading following the report.
Here were the main metrics from Snap's report Thursday evening, compared to consensus estimates as compiled by Bloomberg:
Q1 Revenue: $769.6 million vs. $743.97 million expected and $462.48 million Y/Y
Q1 Adjusted earnings per share: breakeven, vs. loss of 6 cents expected and loss of 8 cents Y/Y
Daily active users: 280 million vs. 275.4 million expected and 229 million Y/Y
Snap posted a top-line increase of 66% during the first quarter, accelerating from the prior quarter's 61% revenue growth rate. The company also eked out an unexpected breakeven result in adjusted earnings per share, whereas a loss was expected.
"We began 2021 by achieving our highest year-over-year revenue and daily active user growth rates in over three years during the quarter, and delivering positive free cash flow for the first time in Snap’s history as a public company,” Snap CEO Evan Spiegel said in a press statement. “The strength of our business underscores our relentless focus on product innovation and is a testament to our team’s ability to execute well together over the long term.”
However, for the current quarter, Snap forecasted an adjusted EBITDA loss of between $20 million and breakeven, sharply missing the consensus estimate for a loss of $1.28 million, based on the midpoint estimate.
Like many other social media platforms, Snap, the parent company of the disappearing image-sharing app Snapchat, benefited from a rise in adoption and engagement during the pandemic as users stuck at home sought out entertainment online. Daily active users increased between 17% and 22% year-over-year in every quarter in 2020, for growth rates well above those from 2019. Snap grew its user base by another 22% in the first three months of 2021, extending its recent run of strength into the first three months of the year.
However, investors were set to be especially attuned to any signals from Snap's report that the momentum might be slowing down heading into the second quarter and second half of this year, once more social distancing restrictions get rolled back and users begin to go out more frequently. Netflix's (NFLX) first-quarter results from earlier this week served as one example of a media company already experiencing payback after a 2020 boost, with net subscriber additions sharply missing expectations.
"The month of April should be peak growth for the Online media sector, and the key question for the group is if positive estimate revisions outweigh any potential sector multiple compression," Justin Post, Bank of America research analyst, wrote in a note published April 19.
Still, Snap also has a "reopening trade" angle to its business, given that its advertising sales are expected to pick back up in tandem with economic growth, as customers become more apt to spend on marketing. And Snap suggested its engagement has continued to hold up even as the economy reopens further.
"As things began to open up in the United States in late February, we saw inflection points in key behaviors like Story posting and engagement with the Snap Map," Spiegel said in prepared remarks for the company's first-quarter earnings call. "More recently, we saw a rise in the rate of new friendships and bi-directional communication on Snapchat in late March as people have begun to socialize in broader groups. We designed Snapchat to be a useful complement to real-life friendships, and are excited about these optimistic trends developing with our audience."
And Snap has remained popular among one of its most lucrative cohorts — teen users. Snap remained the most popular social media platform among U.S. teens between mid-February and March this year, outpacing even TikTok and Facebook-owned (FB) Instagram, Wall Street firm Piper Sandler said in its semi-annual "Taking Stock with Teens" survey. Snap reported on Thursday that more than 125 million users used its new Spotlight feature in March, which functions similarly to TikTok in allowing users to promote short viral, public videos.
Shares of Snap have risen 14% for the year-to-date through Wednesday's close, outperforming against the S&P 500's 10.4% gain over the same period.
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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