Shares of Snap Inc. (SNAP, Financial) soared more than 20% in after-hours trading on Tuesday following the release of strong third-quarter results.
The Santa Monica, California-based social media company posted adjusted earnings of 1 cent per share, which topped the loss of 5 cents per share Refinitiv analysts were anticipating. Revenue grew 59% from the prior-year quarter to $679 million, surpassing expectations of $555.9 million.
Snap's net loss fell to $200 million, which was down nearly 12% from the $227 million net loss it recorded last year.
The company, which is known for its popular app Snapchat, also recorded 249 million global daily active users. This was a 4% increase from the 238 million DAUs reported in July and up 19% compared to the same period a year ago. It was also ahead of FactSet analysts' projections of 244.12 million users. Average revenue per user was $2.73, beating estimates of $2.27.
In a statement, CEO Evan Spiegel noted Snap's success underscores "the excitement that our community and our advertising partners have around our innovative products and services."
"Our focus on delivering value for our community and advertising partners is yielding positive results during this challenging time. We're excited about the growth of our business in Q3 as we continue to make long-term investments in our future," he said. "The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us."
During the earnings call, Snap Chief Business Officer Jeremi Gorman attributed the company's performance to the effort it made in engaging brands that were looking "to align their marketing efforts with platforms who share their corporate values."
CNBC reported this initiative coincided with the StopHateForProfit Facebook (FB, Financial) boycott in July, in which over 1,000 advertisers paused ads on the social network in response to its policies regarding hate speech and misinformation.
"This gave us an opportunity to engage with advertisers and agencies in real time to ensure that our existing partners as well as new prospects understood our offering in relation to our values," Gorman said.
Looking ahead to the fourth quarter, the company is guiding for year-over-year revenue growth between 47% and 50%. Chief Financial Officer Derek Andersen said it is hoping to reach approximately 257 million DAUs as well. However, year-to-year expense growth is also expected to be higher in the fourth quarter than the company has recorded year to date.
"While there is continued uncertainty about the macro operating environment, we are pleased with the strength of the underlying momentum we have established with our advertising partners, and we remain highly optimistic about the long term prospects for our business," Andersen said.
The stock's momentum carried over into Wednesday morning trading. With a $51.03 billion market cap, shares of Snap were up 26.68% at $36.04. GuruFocus estimates the stock has climbed over 100% year to date.
Other tech companies in the advertising space also saw their stocks rise on Wednesday as Snap's results indicated there is renewed strength in the ad market after the coronavirus pandemic created a difficult environment this year. Facebook was up 4.03%, while Pinterest Inc. (PINS, Financial) rose 9.14%, Alphabet Inc. (GOOG, Financial)(GOOGL, Financial) gained 2.25% and Twitter Inc. (TWTR, Financial) climbed 6.86%.
Disclosure: No positions.
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