Snapchat owner Snap Inc. reported a stronger-than-expected gain in fourth-quarter revenue, exceeding analyst estimates and sending shares soaring. The company’s ad business is showing signs of improvement, with small- and medium-sized marketers attracted to its targeted ads.
Revenue rose 14% to $1.56 billion in the period that ended December 31, with Snap expecting first-quarter sales of up to $1.36 billion. This exceeds the average analyst estimate of $1.33 billion.
The company’s overhaul of its advertising business has paid off, with new ad formats attracting more advertisers to the platform. Chief Executive Officer Evan Spiegel spent several years revamping Snapchat’s ads operation, moving away from broadly-targeted brand advertising towards more targeted ads with a direct prompt or call-to-action.
Snap’s user growth also beat analyst expectations, reaching 453 million daily active users in the fourth quarter. Profit, excluding certain items, rose to 16 cents a share, topping the average projection of 14 cents.
The company has released several new ad choices in recent months, including Sponsored Snaps and Promoted Places. Snap is also focusing on smaller marketers as a segment that contributed significantly to its ad revenue growth last year.
Snap has elevated an executive to oversee its growing ads business: Ajit Mohan, who will also be in charge of the company’s other revenue products and operations.
The company’s AI investment continues to grow, with plans to spend about 85 cents per daily user on infrastructure services related to those technologies. Snap relies on cloud computing services and has a partnership with Alphabet’s Google for this reason.
Snap’s shares rose 1.8% pre-market trading Wednesday, marking the second day in a row that the stock has seen significant gains. The company’s subscription product now has 14 million subscribers and is on track for more than $500 million in annual revenue.
Source: https://finance.yahoo.com/news/snap-sales-top-estimates-strength-211442883.html