(Bloomberg) — Snap Inc. gained in extended trading after projecting that revenue in the current quarter will jump as much as 18%, beating analysts’ estimates and offering a sign that the overhaul to its advertising business has taken hold with marketers.
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Sales will be $1.23 billion to $1.26 billion in the period ending in June, the company said Thursday in a statement. Analysts, on average, projected $1.21 billion.
Chief Executive Officer Evan Spiegel has reshaped the company over the past two years, downsizing headcount and eliminating projects that don’t boost revenue or user growth. At the same time, Snap has reworked its advertising business, introducing new ways to target and measure ads on the Snapchat app, and added new direct-response offerings. While those changes initially dragged on revenue, the latest results show the modifications are working.
“The value we provide our community and advertising partners has translated into improved financial performance,” Spiegel said in the statement. “Our large, growing, and hard-to-reach community, brand-safe environment, and full-funnel advertising solutions have made us an increasingly important partner for businesses of all sizes.”
First-quarter revenue was $1.2 billion, a 21% jump from the period a year ago, when the company was making wide-ranging changes to its digital ad offerings. Analysts, on average, estimated $1.12 billion.
Snap posted adjusted earnings before interest, tax, depreciation and amortization of $45.7 million, compared with less than $1 million a year earlier. Analysts projected a loss of $67.6 million.
The shares surged as much as 32% in extended trading after closing at $11.40 in New York. The stock has declined 33% this year. Snap’s results came the same week that the US government moved to ban or force the sale of a key competitor, ByteDance Ltd.’s TikTok.
The company said users spent 125% more time last quarter watching Spotlight, its scrollable feed of videos that offers a similar experience to TikTok. With the possibility that TikTok may be banned in the US, investors will pay close attention to whether Snapchat and its peers will see any benefit in the coming quarters.
Snapchat recorded 422 million daily active users in quarter ended March 31, a gain of 10% from a year earlier. The company projected 431 million users in the current period. Both measures beat analysts’ average estimates.
Santa Monica, California-based Snap has also looked to its users for new sources of revenue. The company’s subscription offering, Snapchat+, had more than 9 million paying users in the first quarter – triple the number from last year.
The company has continued investing in machine learning, augmented reality and artificial intelligence technology to help recommend the right content to Snapchat users and improve its digital ad offerings. That type of computing requires spending for tech infrastructure, and Snap is gave full-year guidance on that expense for the first time. The company expects to spend 83 cents to 85 cents per user each quarter for the remainder of the year.
Snap posted a net loss of $305 million in the first quarter, a 7% improvement from the period a year earlier. Earnings, excluding some items, were 3 cents a share compared with analysts’ estimate of a loss of 5 cents.
(Updates with Spotlight metric in the eighth paragraph)
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