Snap Q3 2021 Earnings Report Recap

^{Source: Predictions based on analysts' consensus from Visible Alpha}

Snap (SNAP) Financial Results: Analysis

Snap Inc. (SNAP) reported Q3 FY 2021 earnings that beat analyst expectations, while revenue matched estimates. Adjusted earnings per share (EPS) rose seventeen-fold compared to the year-ago quarter, more than doubling analysts' estimates. Revenue expanded 57.3% year over year (YOY), slowing from the previous quarter's exceptionally rapid pace. Snap's average daily active users (DAUs) also came in above expectations. The company's shares plummeted more than 25% in after-hours trading. Over the past year, Snap's shares have provided a total return of 105.8%, well above the S&P 500's total return of 32.4%.

SNAP Daily Active Users

Snap's average DAUs rose 23% YOY, matching the previous quarter's pace of growth and marking the fourth consecutive quarter of +20% growth. 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 Advertising Business Challenges

In prepared remarks, Snap's CEO Evan Spiegel indicated that the company faced disruptions caused by changes to Apple Inc.'s (AAPL) iOS ad tracking, which were rolled out in June and July. "While we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS," said Spiegel.

He also said that Snap's advertising partners faced a number of supply chain interruptions and labor shortages. "This in turn reduces their short-term appetite to generate additional customer demand through advertising at a time when their businesses are already supply-constrained," Spiegel said.

Snap offered revenue guidance for the final quarter of FY 2021. The company estimates that it will generate approximately $1.2 billion of revenue in Q4. It also estimates that its DAUs will be between 316 million and 318 million in the final quarter of the year. Snap's next earnings report (for Q4 FY 2021) is estimated to be released on Feb. 2, 2022.