Snap Q1 Review: No Slowdown in Sight

Snap Q1 Review: No Slowdown Sight
Cheyne Gateley/VIP

Snap is on fire and is showing absolutely no signs of slowing down — pandemic or not. 

During the first quarter, Snap’s revenue surged 66%, to $770 million, which was the highest year-over-year growth rate for the social giant since 2017. Daily Active Users (DAUs), a closely watched industry metric, jumped 22%, and the company posted positive free cash flow for the first time ever of $126 million. Average revenue per user (ARPU) increased by two cents to $2.74. 

Those numbers had investors celebrating in the after-hours session Thursday. Snap shares shot up as much as 6% following the results and added to stock’s already impressive 255% gain over the past 12 months.  

It was a strong quarter across the board. Snap said the majority of its DAUs during Q1 were on Android devices — again, a first for the company. Snap revamped its Android app back in 2018, and it’s finally paying off.  

Breaking it down by region, North America saw DAUs increase by 1 million, but most of the user growth came from outside the U.S. and Canada.  

The global pandemic forced most people around the world to social distance and stay at home for the past year. As a result, Snap, along with other so-called stay-at-home trades saw increased engagement and usage across their products. While other stay-at-home trades, like Netflix, show signs of unraveling as the world slowly reopens, things are just heating up at Snap.  

On the earnings conference call Thursday afternoon, CEO Evan Spiegel said Snapchat saw the rate of new friendships increased at the end of March. Looking to the second quarter, it expects revenue to jump between 80% to 85% and DAUs to grow another 22%, to 290 million. 

Advertising will continue to play a crucial role for Snap. The company is already seeing strong advertising demand as the ad market rebounds following a pandemic-induced rut. Ad revenue represents a large portion of overall revenue for the company.  

According to Snap’s chief business officer Jeremi Gorman, “The amount of money committed via upfronts for 2021 is already more than 50% above the total upfront commitments made in 2020, which is a strong signal that brands and agencies have confidence in our platform.”  

More innovation will continue to drive higher user engagement, and higher user engagement will in turn yield higher revenue as advertisers flock to the platform. If the results from Q1 are any indication, Snap seems to have figured out the right formula to keep consumers, investors and advertisers happy.