Snap Inc. Q3 FY2025 earnings call

Community and Revenue Growth - Community reached 477M DAU and 943M MAU, with progress toward 1B MAU. - Revenue up 10% YOY to $1.51B, driven by improved ad demand and direct revenue streams. - Other revenue grew 54% YOY to $190M, with Snapchat+ subscription contributing. ### Product Innovations - Expanded premium offerings like new memory storage plans and AI-powered Lens+ and Platinum bundles. - Introduced features like Infinite retention, Homesafe, Snapchat keyboard, and Custom Moji to enhance communication. ### Ad Platform Advancements - Strengthened ad products with Sponsored Snaps, Promoted Places, App Power Pack, and AI-driven optimizations. - SMBs remained a key growth driver, with focus on mid-market segment. - Direct revenue expanded with premium tiers and plans for live streaming and creator tools. ### AR Initiatives - Over 8B AR lens uses daily, 350M daily AR users. - Introduced Imagine lens and Gen AI-powered lenses, with AI Clips coming soon. - Snap OS 2.0, Snap Cloud, and developer ecosystem advanced for AR glasses.

In Q3, Snap's community reached 477 million daily active users (an 8% YOY increase) and 943 million monthly active users (a 7% YOY increase). Revenue was $1.51 billion, up 10% YOY. Advertising revenue was $1.32 billion, up 5% YOY, driven by direct response advertising revenue growth of 8% YOY and 13% QOQ. Other revenue, including Snapchat+ subscription revenue, was $190 million, up 54% YOY, reaching an annualized run rate of over $750 million. Adjusted EBITDA was $182 million, and free cash flow was $93 million.

Revenue Guidance - Q4 revenue guidance: $1.68 billion to $1.71 billion, implying 8%-10% YOY growth. ### Adjusted EBITDA - Anticipates adjusted EBITDA between $280 million and $310 million in Q4. ### Share Repurchase - Authorized a new $500 million share repurchase program.

Regulatory and Engagement Impacts - Potential adverse impacts on engagement from platform-level age verification, regulatory actions (e.g., Australia's social media minimum age bill), and internal initiatives like recalibrating community growth investments. - Trade-offs between monetization efforts (e.g., memory storage plans) and engagement metrics.

Q: On the Perplexity partnership, is the cash stock split determined and how monetization works for the partnership?

A: Evan Spiegel said the $400M from Perplexity won't be recognized until rollout in early 2026, and Perplexity controls responses; no ads on Perplexity responses but placement helps Perplexity gain subscribers. Derek Andersen discussed gross margin expansion efforts including top-line growth and cost optimization.

Q: How do Snaps evolve as a distribution channel and commentary on Q4 engagement headwinds?

A: Evan Spiegel noted opportunity to open chat inbox to more AI agents and distribute via Sponsored Snaps. On engagement, efforts to overcome headwinds include new conversation starters, but there may be trade-offs with monetization and regulatory actions.

Q: Expansion of go-to-market efforts for midsized advertisers?

A: Evan Spiegel mentioned focus on speeding up onboarding, simplifying account setup, and partner onboarding to accelerate growth with small and medium customers.

Q: Direct response advertising growth and stability of bidding tools?

A: Derek Andersen said direct response revenue was up 8% YOY, an acceleration of 3 percentage points. Strong growth in Europe and Rest of World, with focus on doubling down on working areas in North America's large client segment and ensuring bidding tool stability.

Q: Infrastructure costs for next year?

A: Derek Andersen discussed drivers like ML/AI infrastructure, capacity utilization improvement, and cost to serve calibration, aiming for flat infrastructure costs in 2026.

Q: Latest thinking on spectacles and leveraging software vs hardware?

A: Evan Spiegel said specs are in a standalone subsidiary, focusing on technical leadership, with an exciting year ahead for public release and leveraging software stack for AR glasses.