Snap Shares Slide After Hours as User Miss and 4% Ad Growth Overshadow 30 Million Paid Subscribers

Snap Inc. (SNAP) said third-quarter revenue rose 14% year over year to $1.72 billion, just short of the $1.73 billion analysts expected, according to LSEG data cited by CNBC. Daily active users reached 495 million, up from 493 million in the second quarter but below the 499 million StreetAccount expected, per CNBC. The shares had closed Wednesday's regular session up 5.9% at $5.92, per SentiSense price data, then tumbled 11% after hours, and were down 9.8% in pre-open trading Thursday, according to Investing.com.

Advertising is the weak spot. Ad revenue grew just 4%, slowing from 9% in the second quarter according to Investing.com, as upper funnel brand advertising declined year over year; direct response advertising now makes up about 77% of revenue. CEO Evan Spiegel acknowledged that "advertising revenue growth remains below our ambitions."

Subscriptions and profitability carried the quarter. Other revenue grew 84%, led by Snapchat+, Memories Storage and Lens+, and Snap passed 30 million paid subscribers across those products. Net income was $56 million against a $104 million loss a year earlier, adjusted EBITDA rose to $383 million from $182 million, gross margin reached 62%, and free cash flow climbed 76% to $164 million.

Snap guided fourth-quarter revenue to $1.950 billion to $1.985 billion and adjusted EBITDA to $490 million to $525 million, and it will switch to global monthly active users as its primary audience metric starting with the first quarter of 2027. B. Riley cut its price target to $8 from $10 but kept its Buy rating. Points to watch are whether ad growth reaccelerates in the fourth quarter as management expects, and whether brand advertising stabilizes in 2027.