Snap Earnings: Near-Term Outlook Sinks Due to Macroeconomic Uncertainty

Morningstar’s Metrics for Snap

• Fair Value Estimate: $11.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Snap’s Earnings

Snap SNAP reported solid first-quarter 2025 results, driven by strong user growth and rising average revenue per user. However, management’s decision to withhold guidance due to demand uncertainty suggests weaker near-term growth prospects amid a volatile macro environment.

Why it matters: While Snap’s monetization improved during the quarter, the tariff-induced macro uncertainty has made the remainder of 2025 far murkier. With digital advertising budgets under pressure, Snap’s weaker monetization engine may put it at a disadvantage.

• For the first quarter, Snap’s sales grew 14% year over year to $1.4 billion, driven by 9% growth in daily active users to 460 million. International markets’ DAU growth remained particularly strong, growing 16%, more than offsetting US DAU’s 1% decline.
• Global average revenue per user rose 5% to $2.96, led by 13% growth in North America, its most monetized market. ARPU in Europe and other international regions grew 11% and 4%, respectively.

The bottom line: We lower our fair value estimate for no-moat Snap to $11 per share from $13 as we revise our near-term estimates downward. Management’s commentary regarding the weak start to the second quarter further guides our view that 2025 may be a difficult year for Snap in terms of digital ads.

• Snapchat+ subscription revenue, a less macro-sensitive part of the firm’s top line, remained a bright spot, growing 75% year over year to $152 million, with the subscriber count up 59% to 15 million. We have a favorable outlook on this revenue stream, given its growth and contribution to the top line.
• On profitability, Snap exceeded our estimates, reporting an operating loss of negative 14%, a significant improvement from negative 28% a year ago. Ongoing operational discipline efforts as well as an improvement in the firm’s monetization drove much of the operating margin improvement.