This article first appeared on GuruFocus .
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Revenue:$1.72 billion, up 14% year-over-year (within guidance of $1.70B$1.74B).
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Advertising Revenue:Grew 4% year-over-year.
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Other Revenue:Grew 84% year-over-year, led by Snapchat+, Memory Storage, and Lens+.
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Gross Margin:62%, expanded approximately 7 percentage points year-over-year.
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Net Income:$56 million, an improvement of $160 million year-over-year; net income margin expanded approximately 10 percentage points.
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Adjusted EBITDA:$383 million, up approximately $201 million year-over-year; margin of 22%, expanded approximately 10 percentage points.
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Operating Leverage:Approximately 93% of incremental revenue flowed through to adjusted EBITDA; total cost structure grew just 1% year-over-year.
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Operating Cash Flow:$210 million, up 44% year-over-year; trailing 12-month operating cash flow of $983 million, up 59%.
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Free Cash Flow:$164 million, up 76% year-over-year; trailing 12-month free cash flow of $777 million, up 88%.
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Daily Active Users:495 million.
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Monthly Active Users:977 million.
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Paid Subscribers:Surpassed 30 million across Snapchat+, Memory Storage, and Lens+.
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Cash & Securities:Approximately $2.77 billion in cash equivalents and marketable securities, up approximately $111 million from end of Q2.
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Shares Outstanding:Approximately 1.93 billion (including shares underlying stock-based awards), up 3.8% year-over-year.
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Q4 Revenue Guidance:$1.950 billion to $1.985 billion.
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Full-Year Infrastructure Costs:Now expected at $1.65 billion to $1.66 billion (prior guidance $1.65B$1.70B).
Release Date: November 04, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Revenue increased 14% year-over-year to $1.72 billion, with positive net income of $56 million.
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Gross margin expanded by approximately seven percentage points to 62%, and adjusted EBITDA margin expanded by approximately 10 percentage points to 22%.
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Daily active users grew to 495 million and monthly active users grew to 977 million, with average daily messages sent up 8% year-over-year.
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Other revenue grew 84% year-over-year, surpassing 30 million paid subscribers across Snapchat Plus, Memory Storage, and Lens Plus.
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Operating cash flow increased 44% year-over-year to $210 million, and free cash flow increased 76% to $164 million.
Negative Points
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Advertising revenue grew only 4% year-over-year, below the company's ambitions, due to a decline in upper funnel brand advertising.
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Brand advertising declined year-over-year, primarily due to lower CPG spending driven by macro pressures in the US and Middle East.
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Total cost structure grew just 1% year-over-year, limiting flexibility for further operating leverage improvements.
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The company faces regulatory scrutiny on youth-related issues that could materially impact the business, including increased compliance costs and potential user growth impacts.
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Dilution remains a concern, with shares outstanding increasing 3.8% year-over-year to approximately 1.93 billion.
Q & A Highlights
Q: Ross Sandler, Barclays Brand advertising was once again the culprit behind Q3 weakness. What is Snap doing to address it, and what is driving the Q4 reacceleration implied by guidance? Also, any early read on Specs? A: CEO Evan Spiegel said brand advertising declined mainly on lower CPG spending driven by macro pressures in the US and Middle East, with Q2 also benefiting from easier World Cup-related comparisons. He pointed to positive growth signals from diversified verticals such as US financial services, along with inventory and format expansion, as reasons to expect the brand business to "ground" over the course of 2027. On Specs, CCO Ronan Harris said the First Look pop-up in Los Angeles has hosted more than 10,000 demos, and Snap expects to begin shipping Specs later this fall.
Q: Eric Sheridan, Goldman Sachs What is the thought process behind shifting the primary audience metric to MAU, and how should investors think about the Sponsored Snaps opportunity? A: CFO Doug Hott said the change reflects the 2025 shift toward more profitable growth, with less emphasis on buying DAU growth and more focus on direct revenue. As Snapchat approaches 1 billion monthly users, MAU gives the clearest view of community scale and long-term revenue opportunity, while giving teams flexibility to make long-term product and safety decisions that may affect daily use near term. CEO Evan Spiegel added that Sponsored Snaps revenue grew 56% sequentially in Q3, auction-based Sponsored Snaps launched in Europe, and dynamic product ads are now available in chat.
Q: Doug Anmuth, JPMorgan What are the most important things needed to accelerate advertising growth toward the mid-teens, and where does Snap stand on AI-driven ad improvements? A: CEO Evan Spiegel acknowledged 4% ad growth is below ambitions but said he is cautiously optimistic about Q4 acceleration. Direct response remains the durable underpinning: app purchase campaign volume more than doubled, cost per purchase fell about 24%, and revenue grew over 54%, while web purchase campaigns delivered more purchases at lower cost with revenue up 11%. He cited AI-powered recommendations, easier third-party measurement, and new placements across Chat, Spotlight and the Mapincluding Promoted Places, where revenue and advertiser adoption both more than doubled sequentiallyas key accelerants.
Q: Rich Greenfield, LightShed Partners What are examples of Snap choosing not to optimize daily use for long-term value, and how large is brand advertising relative to direct response? A: CEO Evan Spiegel cited forgoing costly user acquisition in geographies Snap does not effectively monetize, and avoiding notifications or features that drive app opens without long-term value. He said the shift to MAU reflects a focus on lasting utility and durable audience growth, not accepting lower time spent or ad revenue. CCO Ronan Harris said direct response now represents about 77% of revenue, up substantially year-over-year, and should keep growing near term as brand go-to-market and product innovations kick in during 2027.
Q: Justin Post, Bank of America What is driving the strong Spotlight growth, and why isn't engagement translating into US and Europe DAUs? A: CEO Evan Spiegel said Snap removed AI-generated and reposted content earlier this year to focus on authentic content from real creators, which drove meaningful growth in Spotlight posters and expanded inventory. Globally, Spotlight posters grew 130% year-over-year and daily active viewers rose 40%. He said Snap is working on ranking architecture and exploring generative techniques, and is focused on Spotlight strengthening friend-to-friend connections. CCO Ronan Harris added that Spotlight eCPM rose 22% year-over-year.
Q: Dan Salmon, New Street Research What is the state of the direct response business, and how is Snap growing both small and large advertisers? A: CCO Ronan Harris said the focus is making performance easy to see, measure, buy and scale, supported by dynamic product ads, generative retrieval, agentic recommendations, unified attribution and third-party measurement. For small advertisers, Snap is simplifying onboarding, self-serve and managed buying and deepening integrations with third-party buying platforms. For larger advertisers, reliable measurement and consistent performance are intended to earn everyday performance budgets and a larger share of wallet.
Q: Alice Duska, Loop Capital With 93% incremental EBITDA flow-through and seven points of gross margin expansion in 2026, how much more room is there for cost optimization, and can similar margin improvements be expected in 2027? A: CFO Doug Hott said Q3 demonstrates Snap's earnings power when revenue grows faster than costsrevenue rose 14% while the total cost structure grew just 1%, gross margin reached 62%, and net income was $56 million. He noted the 93% flow-through reflects this quarter's year-over-year operating leverage and is subject to revenue mix, seasonality and expense timing. He said the objective is translating earnings progress into sustained free cash flow per share rather than optimizing a single quarter's margin.
Q: Ross Sandler, Barclays Can you elaborate on the Q4 guidance range and what you are seeing quarter-to-date? A: CFO Doug Hott guided Q4 revenue to $1.950 billion$1.985 billion, with infrastructure costs expected to grow modestly year-over-year. Full-year infrastructure costs are now expected at $1.65 billion$1.66 billion versus prior guidance of $1.65 billion$1.70 billion, as Snap increased AI and ML investments without raising overall infrastructure costs. Cost of revenue excluding infrastructure is expected at 16%17% of revenue for the full year, or $490 million$525 million in Q4.
Q: Eric Sheridan, Goldman Sachs How should investors think about the new MAU-based ARPU metric and segment reporting going forward? A: CFO Doug Hott said Snap will introduce global MAU-based ARPU as its primary monetization metric alongside global MAU beginning with Q1 2027 results. Together with free cash flow per share, these provide a clearer scorecard covering community scale, monetization progress and shareholder value. Snap will continue to report revenue separately for North America, Europe and rest of world, preserving visibility into regional performance.
Q: Rich Greenfield, LightShed Partners How should investors think about dilution management and capital allocation going forward? A: CFO Doug Hott said Snap ended Q3 with approximately 1.93 billion shares outstanding
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
