Snap Inc (NYSE:SNAP) shares climbed roughly 6% in premarket trading on Thursday after the social media company reported fourth-quarter earnings that exceeded analyst expectations, even as user growth came in below forecasts and forward guidance remained cautious.
The company reported adjusted earnings of $0.03 per share for the fourth quarter, outperforming analyst projections of a $0.03 per share loss. Revenue totalled $1.72 billion, slightly ahead of consensus estimates of $1.7 billion and representing a 10% increase year-on-year.
However, daily active users reached 474 million, missing analyst expectations of 477 million.
“Our Q4 results began to reflect the impact of our strategic pivot toward profitable growth, translating into revenue diversification and meaningful margin expansion,” said CEO Evan Spiegel in a statement.
Gross margin rose to 59% during the quarter, improving by 4 percentage points compared with the previous quarter and by 2 percentage points from the same period last year. Snap generated operating cash flow of $270 million and free cash flow of $206 million during the quarter.
Looking ahead, Snap projected first-quarter 2026 revenue in the range of $1.5 billion to $1.53 billion, falling short of analyst expectations of $1.54 billion. The midpoint of the company’s forecast, $1.515 billion, is about 1.6% below consensus estimates.
“The 1Q revenue guide fell short of expectations as the recently announced Perplexity deal has yet to solidify (still coming to an agreement on terms) and mgmt did not factor it into guidance,” Stifel analyst Mark Kelley said.
“Ultimately, with questions around the timing of the Perplexity deal hitting the P&L and continued headwinds in the user base, we think it will be hard for this one to find support intra-quarter,” he added, lowering his price target to $5.50 from $7.
The company also unveiled a $500 million share repurchase programme designed to offset dilution linked to employee stock compensation.
Snap reported strong growth in its Other Revenue segment, which includes Snapchat+ subscriptions, with revenue increasing 62% year-on-year to $232 million. Subscriber numbers rose 71% year-on-year to 24 million. Revenue from In-App Optimisations increased 89% compared with the previous year, while Dynamic Product Ads revenue grew 19%.
The broader Snapchat platform recorded 946 million monthly active users globally in the fourth quarter, representing an increase of 51 million users, or 6% year-on-year, although daily user growth fell short of expectations.