Snap (SNAP) Down 7.6% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Snap (SNAP). Shares have lost about 7.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Snap due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Snap Inc. before we dive into how investors and analysts have reacted as of late.

SNAP's Q2 Revenues Climb 19% Y/Y, Adjusted EBITDA Surges 505%

Snap reported second-quarter 2026 net loss of 10 cents per diluted share. Adjusted earnings came in at 6 cents per share compared with the Zacks Consensus Estimate of 7 cents. 

Revenues rose 19% year over year to $1.59 billion and beat the Zacks Consensus Estimate by 4.31%. The figure exceeded the top end of the company's prior guidance range of $1.52-$1.55 billion.

Adjusted EBITDA increased 505% year over year (a $208 million increase) to $250 million from $41 million a year earlier and came above the high end of the company's prior guided range of $175-$200 million. Operating loss narrowed 34% year over year to $171 million from $260 million.

Top-Line Details

Revenues from North America (59% of total revenues) rose 15% year over year to $943 million. Revenues from Europe (22% of revenues) climbed 33% year over year to $354 million. Revenues from the Rest of World (ROW) (19% of revenues) rose 17% year over year to $302 million.

Average revenue per user (ARPU) increased 13% year over year to $3.25. North America's ARPU climbed 23% year over year to $10.26, Europe's ARPU rose 36% year over year to $3.62, and ROW's ARPU increased 4% year over year to $1.

Advertising revenues rose 9% year over year to $1.28 billion, reflecting improved momentum with large advertisers in North America, broader adoption of the company's AI-powered Smart Campaign Solutions, and continued strength among small and medium-sized businesses. Other Revenue, which includes Snapchat+ subscriptions, Memories Storage and Lens+, jumped 85% year over year to $316 million. The company noted that less than 3% of its monthly active users are currently paying subscribers, indicating room for continued direct-revenue growth through premium features and additional subscription products.

User Engagement Metrics

Snap's global community reached 493 million daily active users (DAU) in the second quarter, up 5% year over year and from 483 million in the prior quarter. Snap reported 971 million monthly active users (MAU), up 4% year over year, moving closer to the company's long-stated goal of 1 billion MAUs.

In the United States, the number of people posting to Spotlight grew more than 115% year over year, while Spotlight daily active viewers grew more than 20% year over year, supported by continued investment in creators and AI-powered recommendations.

The company also noted that its U.S. audience continues to broaden quarter over quarter, led by users aged 35 and older, increasing Snapchat's relevance in categories such as automotive, healthcare, home goods, financial services, insurance and business-to-business services, and helping diversify the advertiser base.

Advertising Details

AI-driven advertising tools drove efficiency gains during the quarter. For app advertisers, cost per install declined 8% year over year, cost per purchase decreased 18% year over year, and app purchase volume increased 128% year over year. Dynamic Product Ads revenues grew 43% year over year on greater adoption by retailers. Advertisers increased spending across native surfaces such as Sponsored Snaps, where roughly one-third of Snapchatters reached were incremental to other surfaces on Snapchat.

Citing an independent study from Measured, the company noted that Snapchat delivered approximately 19.3% higher incremental return on ad spend for the brands in that portfolio, versus the blended incremental return across their social advertising overall.

AI-Driven Operating Efficiency

Snap highlighted several internal efficiency gains tied to its AI investments during the quarter. Code commits per engineer increased 75% year over year, while major reliability issues declined 57% year over year. The company's internal AI code reviewer now covers approximately 90% of pull requests and has saved an estimated 30,000 hours of code-review time. Its AI-powered support agent answers approximately 3.9 million Snapchatter questions per month and has cut support ticket volume by approximately 62% since the start of the year. In advertising operations, first-pass image-review automation rose from 40% in the second quarter of 2025 to nearly 90% in the second quarter of 2026, improving advertiser approval speed and content safety while lowering operating costs.

Operating Details

GAAP gross margin expanded seven percentage points year over year to 58%, while adjusted Gross Margin reached 59%. The company's total adjusted cost structure increased just 4% year over year, as operating efficiencies offset continued investment in long-term revenue drivers.

Balance Sheet and Cash Flow

Snap ended the second quarter with approximately $2.7 billion in cash and marketable securities. Operating cash flow was $176 million for the quarter, up 99% year over year, and $919 million on a trailing-12-month basis. Free Cash Flow was $121 million for the quarter, up 407% year over year, and $706 million on a trailing-12-month basis.

Guidance

Snap expects third-quarter 2026 revenues in the range of $1.70-$1.74 billion, implying growth of approximately 19% year over year at the midpoint. The company projects adjusted EBITDA between $300 million and $350 million for the third quarter, with personnel-cost savings from its recently completed restructuring expected to be more fully reflected in the third quarter and beyond.

Snap raised its full-year infrastructure cost guidance to $1.65-$1.7 billion, from a prior range of $1.60-$1.65 billion, reflecting additional investment in AI and machine-learning infrastructure needed to support revenue growth. All Other Cost of Revenue, excluding Infrastructure Costs, is still expected to represent 16-17% of revenues for the full year. Full-year adjusted Operating Expenses are expected at approximately $2.75 billion, with stock-based compensation expected at approximately $1.05 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a flat trend in fresh estimates.

The consensus estimate has shifted -125% due to these changes.

VGM Scores

Currently, Snap has a great Growth Score of A, a score with the same score on the momentum front. However, the stock has a score of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Snap has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Snap belongs to the Zacks Internet - Software industry. Another stock from the same industry, CCC Intelligent Solutions Holdings Inc. (CCC), has gained 14.4% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

CCC Intelligent Solutions reported revenues of $285.93 million in the last reported quarter, representing a year-over-year change of +9.8%. EPS of $0.10 for the same period compares with $0.09 a year ago.

For the current quarter, CCC Intelligent Solutions is expected to post earnings of $0.11 per share, indicating a change of +22.2% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

CCC Intelligent Solutions has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

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This article originally published on Zacks Investment Research (zacks.com).

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