Key Takeaways

  • Average daily active users surpassed analyst expectations by 2 million.
  • The more daily active users Snap can attract and retain, the more appealing its platform is to potential advertisers. Selling ad space is how the company generates most of its revenue.
  • Snap said it was less affected by changes made by Apple that allow iPhone users to opt out of apps' ability to track their data.
Snap Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS Beat $0.10 -$0.01
Revenue Beat $982.1M $848.4M
Average Daily Active Users Beat 293.0M 291.0M

Source: Predictions based on analysts' consensus from Visible Alpha

Snap (SNAP) Financial Results: Analysis

Snap Inc. (SNAP) reported Q2 FY 2021 earnings that beat analyst expectations. Adjusted earnings per share (EPS) came in at $0.10 for the quarter, better than the adjusted loss per share of $0.01 forecast by analysts. Revenue also surpassed analyst estimates, rising 116.2% year over year (YOY). The company said that it was the fastest pace of revenue growth in the past four years. Snap's average daily active users (DAUs) also came in 2 million above expectations.

The company's shares rose more than 16% in after-hours trading. Over the past year, Snap's shares have provided a total return of 171.7%, well above the S&P 500's total return of 33.3%.

SNAP Daily Active Users

Snap's average DAUs rose 23% YOY, marking the fastest pace of growth in the past four years. DAUs are defined as any registered Snapchat user who opens the Snapchat app at least once during a 24-hour period. Average DAUs for any specific quarter are calculated by summing the number of DAUs on each day of that quarter and dividing the total by the number of days in the quarter. The metric provides a snapshot of the size of Snap's total user base. The bigger that user base is, the more attractive the platform is to advertisers, and the more Snap will be able to generate revenue from selling ad space.

SNAP and Apple's App Tracking Transparency Changes to iOS

Snap noted in prepared remarks for the quarter that it was less affected by Apple Inc.'s (AAPL) App Tracking Transparency-related changes to its iPhone operating system. Those changes require users to authorize the tracking of data by any app installed on the device. If users opt out and don't authorize an app to track their data, it makes the app less attractive as a platform to potential advertisers. Snap said that it observed higher opt-in rates by users of its app, which means that those users did not bar Snap's ability to track their data. The company believes that this is partly due to the trust its community has in its products and business.

Snap also noted, however, that Apple's rollout of the changes came later in the quarter than anticipated, and the pace of updates by iPhone users has also been slower than expected. "This has given us more time with advertisers to navigate the transition but also means the effects of these changes will come later than we initially expected," said Chief Business Officer Jeremi Gorman.

Snap expects revenue to increase somewhere between 58% and 60% YOY in Q3 FY 2021. It expects its DAUs to grow approximately 21% YOY to about 301 million in Q3. Snap's next earnings report (for Q3 FY 2021) is estimated to be released on Oct. 18, 2021.