Updated Aug 12 at 4:04pm ET.
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The company reported revenue of about 1.6 billion dollars for the quarter, a 19 percent increase that topped what analysts were looking for. More importantly, it generated 121 million dollars in free cash flow, which is the cash left over after paying for operations and equipment. This shows the business is becoming more self-sustaining as it moves away from a history of heavy losses.
The recovery is being led by a stronger advertising business and the rapid growth of its subscription service. While the company still reported a net loss of 164 million dollars, it was smaller than expected. For long-term owners, the key takeaway is that the business is successfully proving it can grow its sales and manage its costs at the same time, even as it navigates a shifting market for social media ads.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
During the recent earnings call, CEO Evan Spiegel avoided specific questions about how many people have pre-ordered the company's upcoming Specs smart glasses. The device is set for a major launch event in September, and it represents a key part of the company's long-term bet on augmented reality, which overlays digital images onto the real world.
While the silence on pre-orders might seem cautious, it is common for the company to keep these numbers private until after a product has officially hit the market. For now, the focus remains on whether these hardware products can eventually become a meaningful part of the business beyond the core messaging app.
The company is changing how it pays creators on its Spotlight feature, which is a feed of short public videos. It will no longer offer financial rewards for videos that are entirely made by artificial intelligence. The goal is to encourage human-made content and prevent the feed from being flooded with low-quality, automated posts. This is a smart move for the long-term health of the app. By prioritizing original content from real people, the company protects the engagement of its users, who come to the platform for authentic connections rather than a feed of generic AI clips.
The company has launched a new feature that lets users share their current music in real time through the Snap Map. This map is a core part of the app where friends can see each other's locations and what they are doing. Adding more interactive features like this helps keep users on the app longer. For the business, higher engagement on the Map is important because it creates more opportunities to show ads and sell services outside of the main chat screen.
Analysts issued a flurry of price target increases following the company's strong second-quarter earnings report. Most analysts are neutral, with 28 of 73 rating it a buy, and the average target price suggests a 49% gain from today.
The company has beaten analyst estimates for eight straight quarters. This suggests management is doing a good job of setting realistic bars and then consistently outperforming them.
| Expectation | |
|---|---|
| EPS | $0.00 |
| Revenue | $1.73B |
