Snap Inc. Q4 FY2025 earnings call

• Over the last 3 years, monthly active users grew by over 150 million to 946 million in Q4, near the goal of 1 billion global monthly active users. • Advertising business focus on 3 core initiatives: fostering direct connections between brands and Snapchatters, leveraging AI tooling for advertisers, and growing advertiser base for small- and medium-sized businesses. • Other revenue growing with subscriptions like Snapchat+ and Memory Storage Plans, with subscribers up 71% year-over-year to 24 million in Q4. • Catalysts for gross margin expansion: community growth in monetizable markets, higher-margin ad placements, and growing subscription business scale. • Community enhancements: AI-powered camera features, improved messaging and interaction experiences, growth in Snap Map users, and content platform optimization with increased reposts and shares.

Total revenue in Q4 was $1.72 billion, up 10% year-over-year. Advertising revenue reached $1.48 billion in Q4, up 5% year-over-year, driven primarily by growth in DR advertising revenue. Other revenue increased 62% year-over-year to reach $232 million in Q4. With subscribers growing 71% year-over-year to reach 24 million in Q4. Adjusted gross margin reached 59% in Q4, up from 55% in Q3 and 57% in Q4 of the prior year. Infrastructure costs per DAU was $0.86 in Q4 and below the top end of the full year cost structure guidance range.

• Q1 revenue guidance range is $1.5 billion to $1.53 billion, excluding potential revenue from perplexity integration. • 2026 infrastructure costs guidance range is $1.6 billion to $1.65 billion. • Remaining components of adjusted cost of revenue estimated at 16% to 17% of revenue in each quarter of 2026. • Full year adjusted operating expenses estimated at approximately $3 billion. • SBC and related expenses estimated at approximately $1.2 billion in 2026. • Adjusted EBITDA in Q1 expected to be between $170 million and $190 million.

• Regulatory environment poses near-term risk to engagement metrics, e.g., platform-level age verification in Australia removed ~400,000 accounts, and pending legislation in other areas could restrict Snapchat use. • Global ad revenue from impressions served to users under age 18 is not material, but changing regulations could impact long-term business dynamics.

Q: Talk about Snap Specs as a key priority in the next 1 to 2 years, including platform and application use cases and how it fits into spatial computing longer term.

A: We're excited for Specs launch this year. Prior versions released in 2024 for developers, who've built various experiences. Upcoming version will have wide range of compelling experiences. Focus on engaging early adopters and developers, with clear path to lightweight, affordable, powerful glasses for immersive real-world experiences.

Q: 1Q guide assumes pickup in growth at high end and no perplexity, talk about ad business trends in 2026.

A: Big focus is generating additional ad demand by showing Ad Platform's strong performance. Active advertisers up 28% year-over-year in Q4. Continue scaling SMB go-to-market operations. Have new leadership in North America LCS segment, new products like Sponsored Snaps and Promoted Places, and smart campaign solutions to build on momentum in 2026.

Q: Subscription side acceleration, marketing and new features, and North American user market.

A: Memory storage plans were big driver of subscriber growth. Have other features coming for direct pay segment. In terms of user growth, close to 1 billion MAU goal. Focus on balancing community growth and revenue growth, reduced community growth marketing spend, rolled out paid features like Memory Storage Plans, which can cause headwind to user engagement but free up resources for valuable geographies.

Q: Litigation or regulatory risk related to age verification and North American outlook.

A: Aware of pending legislation restricting Snapchat use. Global ad revenue from users under 18 not material. Snapchat has positive impact on well-being and friendships, but need to explain difference to regulators as regulations work through court system.

Q: Synergy between Specs and Snap services, audience, developer base, and capitalization.

A: Specs continuation of vision to make computing more human. Important to develop stand-alone brand identity for Specs. Longer term, may have opportunities to raise additional capital, but key now is nailing launch and delivering extraordinary product.

Q: Agentive coding deployment at Snap and benefits.

A: ~40% of new code at Snap is AI generated. Gains across trust and safety, customer service, sales workflows. Accelerates product velocity, engagement, monetization opportunities, and expense efficiency. Massive force multiplier for small team, helps accelerate creative vision into reality.

Q: Decision to moderate infrastructure spending and reasoning.

A: Big driver of infrastructure investment in past years was ML and AI investment. Continue to invest heavily in AI and ML. Key catalysts for margin efficiency: calibrating cost to serve to monetization potential of markets and turning infrastructure into revenue-generating investments, e.g., memory storage plans.