Snap's second-quarter revenue reached $1.3 billion, showing a 9% year-over-year increase primarily attributed to strength in European markets. Adjusted EBITDA margin decreased to 3.1%, impacted by higher infrastructure and personnel costs, alongside poor monetization. Advertising revenue growth was weak at 4% due to an ad pricing error and a reduction in spending from Chinese brands. The company’s initiatives like Snapchat+ are showing initial promise but have not significantly impacted overall growth. The fair value estimate for Snap shares has been reduced to $9, reflecting persistent monetization challenges and lower profitability forecasts.
Snap reported second-quarter revenue of $1.3 billion, up 9% year over year, largely due to strength in European markets. Adjusted EBITDA margin was 3.1%, down 130 basis points year over year due to greater infrastructure, legal, and personnel costs, and weaker monetization.
Advertising revenue grew a weak 4% year over year due to a temporary ad pricing error that led to some ad campaigns clearing at a lower price. The slowdown is also attributable to the cessation of the de minimis exemption leading to Chinese brands like Temu and Shein lowering ad spending.
New initiatives like Snapchat+ and Sponsored Snaps show some early signs of driving better monetization, but are yet to contribute meaningfully to overall growth. We reduce our fair value estimate for no-moat Snap to $9 per share from $11 previously.
Management plans to continue investing heavily in artificial intelligence offerings and kept infrastructure per daily active user and adjusted operating expense guidance unchanged at $0.85 and $2.68 billion at the midpoint, respectively. Third-quarter revenue is expected to be $1.49 billion at the midpoint.
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