Snap 2024 Q1 report hints at murky future

Snap has recently released its 2024 Q1 earnings – and it looks like a lot of good news. But there are hints that not all is as it seems, too.

Takeaways

• Snap Inc. reported a 21% year-over-year increase in revenue for Q1 2024.
• Daily Active Users (DAU) grew by 10% year-over-year.
• Average Revenue Per User (ARPU) increased to $2.83 from $2.58.
• Snap’s adjusted EPS was $0.03 – beating analyst expectations of a $0.26 per share loss.
• The operating loss improved slightly from $365 million last year to $333 million this year.
• Significant growth in ARPU was noted, particularly outside of North America.
• Snapchat+ subscriptions have risen significantly from 3 million to 9 million year-over-year.
• Most of Snap’s growth is occurring in markets outside the United States.
• Despite positive trends, the growth isn’t as dramatic as it might appear.
• The overall assessment is one of meaningful growth, but with continued challenges.

Snap Inc. has recently posted its financial results for Q1 2024, revealing several positive trends amidst ongoing challenges. The company reported a 21% year-over-year increase in revenue, climbing to $1.19 billion from $989 million the previous year. Daily Active Users (DAU) saw a robust 10% growth, reaching 422 million compared to 383 million last year. Additionally, Average Revenue Per User (ARPU) grew to $2.83, up from $2.58, reflecting a promising increase in revenue generation efficiency.

Notably, Snap reported an adjusted EPS of $0.03, surpassing analyst expectations which had anticipated a loss of $0.26 per share. This figure, however, comes with a caveat as it involves several exclusions such as stock-based compensation and depreciation, leading some critics, echoing Charley Munger, to label it as “bullshit earnings.”

The operating loss has shown improvement as well, reducing from $365 million last year to $333 million this year. This decrease suggests a modest enhancement in operational efficiency despite the company’s unstable footing.

What’s underneath Snap’s numbers

A significant aspect of Snap’s current strategy is its expansion beyond traditional markets. The growth in ARPU was up 13% YoY for the rest of the world. While growth in North America was up 17% YoY, there was a notable drop from Q4. The fact that growth of Snapchat+ subscriptions has risen from 3 million to 9 million YoY highlights an effective incremental revenue model that differentiates Snap from other social networks, capitalizing on subscription-based monetization.

Despite these positive metrics, it’s essential to temper expectations. The growth this quarter, while solid, isn’t as spectacular as some might suggest. Most of Snap’s growth is occurring outside the United States, indicating a strategic pivot to less competitive markets. And much like Meta, Snap seems to be charging more for about the same results when it comes to advertising and marketing.

Overall, this quarter marks a period of meaningful growth for Snap. The company shows potential with its increased subscriber base and ARPU, but it remains to be seen how these trends will stabilize in the face of broader market challenges and competitive pressures.