Snap revenue tops estimates due to mobile ad demand

Snap Inc.’s second-quarter revenue topped analyst projections, signaling a pickup in demand for mobile advertising even as a controversial redesign of the Snapchat mobile app continued to hinder user growth.

Separately, Saudi billionaire Prince Alwaleed Bin Talal said he invested $250 million for a 2.3 percent stake in the social-media company. Snap shares jumped as much as 14 percent following the announcements.

Sales climbed 44 percent from a year earlier to $262.3 million, Snap said Tuesday in a statement. That exceeded the $249.8 million average analyst estimate. Though daily average users declined from the prior period for the first time ever, the Los Angeles-based company noted that monthly users — a number it has never reported — are still growing.

After a tumultuous first year as a public company, Snap is starting to show some stability, despite the slowdown in user growth. The company for the first time offered a forecast for future revenue, indicating that it has a clearer understanding of its business potential, even after shifting strategies, cutting staff and cycling through managers. Snap recently appointed a new chief financial officer, Tim Stone, who was previously at Inc.

Second-quarter daily average users fell 2 percent from the previous period to 188 million, missing the average analyst estimate of 193 million. The three months ending in June was the first full quarter in which all users shifted to a new version of Snapchat that separates content from a user’s friends and from public figures.

Shares of Snap initially dropped, then jumped as high as $14.90 in extended trading following the report, after climbing less than 1 percent to $13.12 in New York. The stock has declined 10 percent this year.

Snap said Tuesday that third-quarter revenue would be $265 million to $290 million. Analysts on average project $289.9 million, according to data compiled by Bloomberg.

Still, the company needs to attract more users in order to boost revenue long-term. Snap has been working to carve out a slice of the digital-advertising market dominated by online giants Facebook Inc. and Alphabet Inc.’s Google. The overhaul of the once fast-growing app turned some users away, and more people are flocking to Facebook Inc.’s Instagram, which has successfully copied Snap’s most popular features.

Chief Executive Officer Evan Spiegel defended his strategy, saying that while the redesign was the primary reason for fewer daily users, “we believe that this is an important evolution of our product that will help drive future growth in engagement,” according to his prepared remarks.

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Snap revenue tops estimates due to mobile ad demand