Snap $SNAP ( ▼ 13.37% ) shares are moving higher after the company surprised Wall Street with stronger-than-expected earnings, even as its user base slipped. Investors appear to be rewarding the shift toward margins and revenue quality over pure user growth.
For a company long judged on daily active users, the market suddenly cares more about dollars than eyeballs.
Earnings Beat, Revenue Edges Higher
For Q4, Snap reported revenue of $1.72 billion, slightly ahead of expectations. Adjusted earnings per share came in at $0.183, comfortably beating forecasts.
CEO Evan Spiegel said the results reflect Snap’s pivot toward “profitable growth,” highlighting margin expansion and more diversified revenue streams. The company is putting more emphasis on higher-margin ad formats and subscriptions rather than chasing user growth at any cost.
Guidance Light, But With a Potential Wild Card
Snap’s Q1 revenue outlook of $1.5 billion to $1.53 billion came in just below consensus at the midpoint. However, management noted this forecast does not include potential revenue from a possible deal with Perplexity AI that could be worth about $400 million annually if finalized.
That optional upside, even if uncertain, adds a layer of intrigue to the otherwise cautious top-line outlook.
Users Slip as Strategy Shifts
Global daily active users fell to 474 million from 477 million last quarter. Snap attributed the decline to its decision to cut back on marketing spend aimed purely at boosting user numbers, part of its broader focus on improving profitability.
Instead, the company is doubling down on products like Sponsored Snaps and expanding its subscription offerings. Snap is also continuing to invest in augmented reality, including its Specs AR glasses, signaling it still sees long-term growth opportunities beyond its core app.
For now, the market is signaling that Snap $SNAP’s path to healthier margins may matter more than short-term user growth.