Snapchat Stock Soars on Revenue, User Gains

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Evan Spiegel

The company, which saw its best quarter since its IPO, added 8.9 million daily active users during the fourth quarter.

As Snap Inc. co-founder and CEO Evan Spiegel prepares to launch a redesigned Snapchat intended to draw new users, he demonstrated the app's potential for growth with a strong quarterly earnings report on Tuesday. 

In its best quarter since its public debut, Snapchat parent Snap Inc. brought in nearly $286 million in revenue during the fourth quarter of 2017, up 72 percent from the same period the previous year. It lost 28 cents per share.

Investors, who had been expecting revenue of $255 million and a loss of 33 cents per share, sent the stock soaring on the strong earnings beat. Shares were trading up more than 25 percent after the close of the stock market. 

The report marks the end of a bumpy year for the seven-year-old company since its March IPO. Snap underperformed during its first several earnings reports, causing its stock to drop more than 40 percent since its first day on the New York Stock Exchange.

Snapchat had not been growing as quickly as investors had hoped, causing questions about the app's ability to attract a broad audience beyond its base of young, digital savvy users. Further, the company is not profitable and its advertising business has not yet matured. 

But the company bucked that trend Tuesday, announcing it had added 8.9 million daily active users during the quarter. That's the highest net addition of DAUs for Snapchat since the third quarter of 2016 and significantly more than the 4.5 million it added during the third quarter of 2017. Wall Street had been expecting Snapchat to add 6 million new users during the quarter. 

The company now has 187 million total DAUs, though that's still smaller than Instagram's 500 million DAUs.

During Snap's third-quarter earnings call, Spiegel acknowledged that Snapchat is harder to understand than he initially realized. He then announced the redesign, offering it as a way to staunch the declining growth rates.

The updated app has started to roll out to some users and has already drawn some criticism. It is not yet widely available in the U.S.

"As expected, it will take time for our community to get used to the changes, but overall, we are pleased with the initial results and will be making the redesign available to our entire community in Q1," Spiegel said in his prepared remarks for a call with investors. 

The remarks placed little focus on how the redesign will affect the company's professionally produced content, but do note that Snapchat generated over $100 million in revenue for its content partners in 2017.

Snap shares closed the day up more than 1 percent to $14.06.