Earnings Call Insights: Snap Inc. (SNAP) Q2 2025
Management View
- Evan T. Spiegel, CEO, highlighted Snap’s progress on its long-term strategy, citing “932 million Monthly Active Users in Q2, an increase of 64 million or 7% year-over-year, moving us closer to our goal of serving 1 billion Snapchatters around the world.” He emphasized the growth of small and medium business customers and innovation in augmented reality, stating, “Snapchat+ approached 16 million subscribers in Q2 and was the primary driver of other revenue, growing 64% year-over-year to reach an annualized run rate of nearly $700 million.”
- Spiegel announced the introduction of Lens+, a new Snapchat+ tier, and plans for public launch of Specs AR glasses in 2026. He explained, “Our tight control over each aspect of the hardware and software allows us to deliver a product experience that is unmatched. We’re excited about our progress as we work to make specs available to the public in 2026.”
- He also noted management changes: “Our Chief Information Officer and Chief Information Security Officer will report to me and lead enterprise-wide foundational infrastructure and platform integrity. This new distributed structure will empower our teams to take greater ownership and drive continued innovation for our community and advertising partners. We are grateful to Eric Young, SVP of Engineering for his contributions and wish him all the best as he departs to pursue a new opportunity.”
- CFO Derek Andersen stated, “We continue to drive robust growth in our global community in Q2, with DAU reaching $469 million an increase of $37 million or 9% year-over-year… total revenue reaching $1.345 billion in Q2 and up 9% year-over-year.”
Outlook
- Management guided for Q3 daily active users to be “approximately $476 million in Q3.”
- Q3 revenue guidance was set at “$1.475 billion to $1.505 billion.”
- Andersen maintained full-year guidance for infrastructure cost per DAU at “$0.82 to $0.87 per quarter,” and adjusted operating expenses at “$2.65 billion to $2.7 billion.”
- Stock-based compensation guidance was lowered to a new range of “$1.1 billion to $1.13 billion, which implies a $30 million reduction at the midpoint.”
- Adjusted EBITDA for Q3 is estimated to be “between $110 million and $135 million.”
Financial Results
- Total revenue reported was “$1.345 billion in Q2 and up 9% year-over-year.”
- Advertising revenue reached “$1.174 billion in Q2, up 4% year-over-year, driven primarily by growth from DR advertising revenue, which increased 5% year-over-year.”
- Other revenue increased 64% year-over-year to reach “$171 million in Q2 with the largest driver being Snapchat+ subscribers approaching 16 million in Q2, an increase of 42% year-over-year.”
- Adjusted cost of revenue was “$650 million in Q2, up 11% year-over-year,” while adjusted operating expenses were “$654 million in Q2, up 10% year-over-year.”
- Adjusted EBITDA was “$41 million in Q2 compared to $55 million in Q2 of the prior year. Net loss was $263 million in Q2 compared to a net loss of $249 million in Q2 of the prior year.”
- Free cash flow was “$24 million in Q2, while operating cash flow was $88 million.”
- Snap ended Q2 with “$2.9 billion in cash and marketable securities on hand.”
Q&A
- Ross Adam Sandler, Barclays: Asked about Sponsored Snaps and auction pricing issues. Spiegel responded that Sponsored Snaps have “driven meaningful growth in both incremental reach and conversion for advertisers who utilize the placement” and noted a “2x increase in conversion, a 5x increase in click to convert ratios and a 2x increase in website dwell times compared to other inventories.” Andersen clarified revenue pacing, stating, “we grew ad revenue at a rate of approximately 9% in Q1. And what we saw in April is that ad revenue growth declined to approximately 1% before largely recovering as we move through May.”
- Richard Scott Greenfield, LightShed Partners: Inquired about brand advertising and AR vision. Andersen stated, “brand advertising revenue was flat in Q2.”
- Mark Elliott Shmulik, Bernstein: Probed engagement trends and future of Snapchat+. Spiegel said, “calling growth with friends and family grow something like 30% year-over-year” and described Snapchat+ as achieving a “$700 million annual run rate, growing 64% year-over-year.”
- Mark Stephen F. Mahaney, Evercore: Asked about stock-based compensation and Spotlight monetization. Andersen explained, “we took down the full year cost structure guidance for SBC… about $30 million lower than we’ve been in the prior quarter.”
- Justin Post, Bank of America: Questioned DAU reacceleration and guidance. Spiegel focused on “innovation and landing some new products later in the year.”
- Eric James Sheridan, Goldman Sachs: Asked about AR, AI, and content strategy. Spiegel highlighted, “Our AI investments are really focused on areas where we think we can differentiate.”
- Daniel Salmon, New Street Research: Inquired about small and medium business growth. Spiegel said, “It’s the largest contributor to ad revenue growth in Q2.”
- Benjamin Thomas Black, Deutsche Bank: Asked about Lens+ and its opportunity. Spiegel responded, “Lenses are really heavily engaged with on Snapchat with people using Lenses more than 8 billion times every day.”
Sentiment Analysis
- Analyst sentiment was neutral to slightly positive, focusing on product innovation, monetization progress, and new ad formats, with some concern about ad platform issues and revenue pacing.
- Management maintained a confident tone in prepared remarks, with Spiegel stating, “We’re excited about our progress as we work to make specs available to the public in 2026.” In Q&A, management was forthcoming about operational hiccups, such as the ad auction issue and revenue impact, but emphasized recovery and future opportunities. Andersen explained, “we have since reverted this change and advertising revenue growth has improved.”
- Compared to the previous quarter, management’s tone remained optimistic but acknowledged operational challenges. Analyst tone shifted from cautious optimism to more probing on monetization and growth levers.
Quarter-over-Quarter Comparison
- DAU increased from 460 million in Q1 to 469 million in Q2, while revenue growth slowed from 14% year-over-year in Q1 to 9% in Q2.
- Q1 had higher adjusted EBITDA ($108 million vs. $41 million in Q2) and higher free cash flow ($114 million vs. $24 million in Q2).
- Management guidance language shifted from caution regarding macro uncertainty in Q1 to a more operational focus in Q2, specifically addressing platform issues and new ad inventory.
- Strategic focus evolved from strengthening the ad platform and AI in Q1 to driving Sponsored Snaps adoption, expanding subscriptions, and preparing for the Specs AR glasses launch in Q2.
- Analysts’ questions in Q2 increasingly targeted new monetization streams, product innovation, and platform performance, reflecting a heightened focus on execution and recovery from operational setbacks.
Risks and Concerns
- Management cited operational risks including an ad platform change that “caused some campaigns to clear the auction at substantially reduced prices.”
- Timing of Ramadan and de minimis policy changes were also noted as headwinds.
- Management described mitigation by reverting the platform change and focusing on demand generation for new ad formats.
- Analyst concerns centered on the pace of ad revenue recovery, monetization of new inventory, and engagement trends in the U.S.
Final Takeaway
Snap Inc. management communicated ongoing progress in community growth, product innovation, and augmented reality, while acknowledging operational headwinds that impacted revenue and profitability in Q2. The company is targeting Q3 revenue between $1.475 billion and $1.505 billion, expects further DAU growth, and is focused on scaling new ad formats and subscription products. Management remains confident in its long-term vision, emphasizing continued investment in AI and AR, operational discipline, and the rollout of Specs AR glasses in 2026 as key drivers for future growth.