Snap turned in its highest-ever quarterly revenue in Q2 — more than doubling to $982 million — and netted 13 million daily users, the best user growth rate in four years.
Snapchat’s daily active users averaged 293 million in the second quarter, an increase of 55 million, or 23%, year-over-year (and up from 280 million in Q1). The continued growth shows that Snap is continuing to maintain momentum after seeing huge growth in 2020 fueled by the COVID pandemic. Snap had previously indicated DAUs would reach 290 million in Q2.
Shares of Snap soared more than 16% in after-hours trading, topping $70 per share to reach all-time highs.
The company's rebound in Q2 revenue -- up 116% -- is compared with the year-ago period, when Snap said the coronavirus crisis had dramatically depressed advertiser spending.
Snap remains unprofitable. But the company narrowed its net loss to $152 million in Q2 2021, an improvement of 53% compared with the year prior. Adjusted EBITDA improved 223% to $117 million in the most recent quarter. Earnings per share on an adjusted basis were 10 cents. Wall Street analysts on average expected Q2 revenue of $845 million and an adjusted net loss of 1 cent per share, per financial data provider Refinitiv.
“Our second quarter results reflect the broad-based strength of our business, as we grew both revenue and daily active users at the highest rates we have achieved in the past four years,” said Evan Spiegel, Snap's CEO, in announcing the results. “We are pleased by the progress our team is making with the development of our augmented reality platform, and we are energized by the many opportunities to grow our community and business around the world.”
For the third quarter, Snap expects to reach 301 million DAUs worldwide (which would be up 21%). It forecast revenue of $1.07 billion to $1.085 billion, up 58%-60% year-over-year. It expects adjusted EBITDA to be between $100 million and $120 million, versus $56 million in Q3 2020.
Regarding the impact of Apple's change in iOS 14.5 to require users to opt-in for ad tracking, Snap chief business officer Jeremi Gorman said on the earnings call, "we observed higher opt-in rates than we are seeing reported generally across the industry, which we believe is due in part to the trust our community has in our products and our business." Apple’s rollout of the most recent iOS update came later in Q2 than initially anticipated, and the pace of updates by iPhone users "has also been slower than we anticipated," she added. That's given the company more time with advertisers to "navigate the transition" but it also means the effects of these changes will come later than Snap initially expected, Gorman said.
“Snap’s massive Q2 is a testament to its stickiness with users and advertisers alike," said Aaron Goldman, CMO of ad software and services company Mediaocean. He added that Snap "is positioned well as a closed ecosystem to thrive in a cookieless future. By now it’s clear that Snap should be a part of any brand’s omnichannel advertising strategy.”
During the second quarter, Snap premiered eight new or renewed Snap Originals, including "Swae Meets World," a documentary featuring musician Swae Lee as he prepares to launch a solo album. The company also launched a record 177 new international Discover Channels, including 36 in the U.K. and 24 in India (one of which is a partnership with Sony Pictures Network to launch five shows).
Spiegel also called out the company's progress on its augmented-reality platform. He said Snapchat's recent Cartoon 3D Style Lens, which uses AI to turn people into 3D-animated cartoons, "highlighted the power of Lenses to go viral both inside and outside of Snapchat." In the first week of release, the Cartoon 3D Style Lens generated 2.8 billion impressions on Snapchat alone. In addition, he touted Snap's deal with Disney to feature location-based AR Lenses in the Snapchat app for Walt Disney World Resort in Orlando, Fla., to celebrate the park’s 50th anniversary.
The company said daily active users for Spotlight, its user-generated section of the app for TikTok-like video clips, grew 49% in the second quarter, though it didn't break out a DAU number. Snap said average daily content submissions to Spotlight more than tripled in Q2 and daily time spent per user in the U.S. grew by more than 60% quarter-over-quarter.
"While it is still very early for this new platform, we are excited about the potential for Spotlight to further expand our monetization opportunity in the future," Spiegel said on the earnings call.
At its analyst day in February, Snap said it expects to achieve annual revenue increases of at least 50% over the next several years, a projection Spiegel said does not factor in assumptions about the growth of Snapchat's user base.
Meanwhile, two months ago, Snap made its biggest-ever acquisition with a deal worth more than $500 million for U.K.-based WaveOptics, the company that makes the augmented-reality displays for Snap’s new Spectacles smart glasses.