Snap beats Q1 rev estimates but flags economic headwinds as ad spend slows

Snap Inc. delivered a solid Q1 2025, reporting a 14% year-over-year revenue increase to $1.36 billion, up from $1.19 billion in Q1 2024. The company’s net loss narrowed sharply to $140 million, a 54% improvement from $305 million a year ago. Adjusted EBITDA more than doubled to $108 million, compared to $46 million last year, and free cash flow surged to $114 million from $38 million, reflecting a 202% increase. Operating cash flow also improved to $152 million, up from $88 million.

Snap’s user base continued to expand, reaching 460 million daily active users (DAUs), a 9% year-over-year rise, and 900 million monthly active users. The growth was fueled by advances in direct-response advertising and the Snapchat+ subscription service, which saw revenue jump 75% year-over-year to $152 million.

Despite these gains, Snap refrained from providing Q2 revenue guidance, citing macroeconomic uncertainty and advertiser caution amid shifting economic conditions. The company expects DAUs to reach around 468 million in the next quarter. Snap also revised its full-year operating expense forecast to $2.65–$2.7 billion and lowered its stock-based compensation guidance to $1.1–$1.16 billion.

Market reaction was negative, with Snap’s stock dropping 12.5% in after-hours trading, reflecting investor concerns about future growth and the lack of forward guidance. Nevertheless, Snap’s advertiser base grew, and direct-response ads accounted for a record 75% of ad revenue. The company’s focus on augmented reality and improved ad products continues to bolster its competitive position.

In summary, Snap’s Q1 2025 results highlight robust user and revenue growth, improved profitability, and strong performance in its subscription and ad businesses. However, the company remains cautious about the near-term outlook due to ongoing economic headwinds and uncertainty in the digital advertising market.