Snapchat Ends Growth Slump, Adds 13 Million New Users

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Snap CEO Evan Spiegel

The messaging app now has 203 million daily active users.

The stock for Snapchat's parent company surged on Tuesday afternoon on the news that the company had added 13 million users during the period, a signal that its business is growing following a lackluster 2018. 

Snap Inc., which owns the messaging app, reported that it increased revenue by 48 percent to $388 million during the second quarter of the year and had shrunk its losses to 19 cents per share for the period. Wall Street, per FactSet, was looking for revenue of nearly $360 million and a loss of 22 cents per share. Meanwhile, analysts were expecting the company to add just 2 million users during the period. 

Snap Inc. stock was up more than 11 percent during after-hours trading following the report's release. 

Helping to boost the stock was news that Snapchat's once-sluggish user growth, brought about in part by a redesign that received negative user reviews, has begun to accelerate. The company now has 203 million daily active users, compared with 190 million at the end of the first quarter. This was Snap's strongest quarter of user growth since 2016, the year before it went public. It also was Snap's second consecutive quarter of growth after it added 4 million new users during the first three months of 2019.  

"We are proud of the results that our team delivered this quarter," Snap CEO Evan Spiegel said in prepared remarks released ahead of a Q&A call with investors. He attributed the growth to "several transitions," including improvements to the app and leadership changes, adding "completing these transitions has established a strong foundation for growing our community, increasing engagement and growing advertiser demand."

The strong quarter comes at a critical moment for Snap, which suffered through a challenging 2018 that saw multiple executive departures and slowing user growth. The first quarter of 2019 brought signs that the company's fortunes were shifting, and the stock is up more than 150 percent for the year. 

With a recent Android update fully rolled out, the company is seeing improvements in Snapchat usage, including a 10 percent increase in the retention rate for people who open the app for the first time. Further, Snapchat's Discover platform, where the company has invested heavily in producing original shortform programming, has grown its audience 35 percent year-over-year. Daily watch time is also improving, up 60 percent in the same period. 

"Now that we have built a strong underlying foundation for our service, we are well-positioned to continue investing in key areas like our content platform, our augmented reality platform, and our gaming platform," Spiegel noted.

Snap shares closed the day up more than 4 percent to $14.83.