Snap Shares Surge After First-Ever Quarterly Profit

A woman stands in front of the logo of Snap Inc., on the floor of the New York Stock Exchange (NYSE) in New York City, on March 2, 2017. Lucas Jackson/Reuters

Snap Inc. saw its shares surge by nearly 60 percent after the company reported its first-ever quarterly profit, defying analysts’ predictions that the messaging platform would post another loss.

The California-based company said in a Feb. 3 earnings report that its fourth-quarter profit was $22.6 million, or 1 cent per share. The report came as an upside surprise for markets, with analysts expecting Snap to report a loss of 9 cents a share, according to data from FactSet.

The surprise announcement sent shares of Snap soaring by $14.30, or 58 percent, to $38.89 in after-hours trading. This came after Snap stock dropped nearly 24 percent, following Facebook parent Meta’s shocking plunge.

“2021 was an exciting year for Snap and we made significant progress growing our business and serving our global community,” said CEO Evan Spiegel in Thursday’s earnings report. “The strength of our core business has enabled us to accelerate our investments in augmented reality, transforming the way that the Snapchat community experiences the world through our camera.”

The earnings report also showed that Snap registered a year-on-year increase of 20 percent in daily active users to 319 million.

“Snapchat is clearly not as prone to the ‘TikTok effect’ as Meta, with strong daily active user growth in all regions, including North America,” Insider Intelligence analyst Jasmine Enberg told the Associated Press, referring to Meta’s recent stock slide after a poor earnings performance and loss in users attributed partly to the rise of TikTok.

Enberg also mentioned that Snap was doing well in India, where TikTok is banned by the government. With 115.95 million users, India currently has the biggest user base followed by the United States with 106.2 million and France with 24.1 million.

Similar to Meta, Snap’s advertising capabilities have been curtailed by privacy changes on Apple devices. Apple’s App Tracking Transparency reduces precise targeting of Apple’s users by disabling identifying features and having the ability to opt out of personalized ads.

Snap had positive operating cash flow of $293 million and free cash flow of $223 million. The Q1 2022 outlook has revenue predicted to be between $1.03 billion and $1.08 billion, surpassing analyst estimates, according to IBES data from Refinitiv.

“Our 18 New Year’s Eve Lenses generated more than 7 billion impressions,” said the company in the earnings report touting its augmented reality innovations. “We released several enhancements and new features to Lens Studio, including a new Sounds Library, real-world physics, world mesh, and an API library for real-time data.”

The company has renewed partnerships with broadcasters NBCUniversal, ViacomCBS, and Disney and onboarded 160 new international Discover channels including Seven.One Entertainment Group in Germany and Canal+ in France.

Snap has partnered with Sony Music Entertainment to provide songs for Snapchatters to use in Sounds and Lenses while users can add audio clips from popular TV shows and movies such as The Office, Saturday Night Live, and Bridesmaids through a collaboration with NBCUniversal.