Snap shares surged over 7% in after-hours trading Wednesday after the Snapchat parent reported fourth-quarter revenue that topped Wall Street expectations, hitting $1.72 billion against estimates of $1.70 billion. The social media company also unveiled a $500 million stock buyback program, signaling confidence despite weaker-than-expected guidance for the current quarter. But the headline numbers mask deeper user growth concerns – daily active users came in at 474 million, missing the 478 million analysts projected, while the company cited reduced marketing spend and Australia's new age verification laws as headwinds.
Snap just delivered a mixed earnings report that's got investors cautiously optimistic – but the path forward looks bumpier than the headline revenue beat suggests. The company posted $1.72 billion in fourth-quarter sales, edging past Wall Street's $1.70 billion estimate, while net income nearly quadrupled to $45.2 million from $9.1 million a year ago, according to CNBC's earnings coverage.
The market liked what it saw initially. Shares popped over 7% in after-hours trading, buoyed by the company's announcement of a $500 million stock repurchase program – a signal that management believes the stock is undervalued. Adjusted EBITDA of $358 million handily beat the $300 million StreetAccount was projecting, and the company's first-quarter EBITDA guidance midpoint of $180 million came in slightly ahead of the $178 million estimate.
But peel back the numbers and things get more complicated. Snap reported 474 million global daily active users for Q4, falling short of the 478 million analysts expected. The company's North American DAU came in at 94 million versus projections of 97 million – a significant miss in its most lucrative market. In its investor letter, Snap attributed the sequential drop of 3 million DAUs to a deliberate pullback in marketing spend as it shifts focus "to more profitable growth."
