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

Snap 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.

Zacks Rank & Stocks to Consider

SNAP currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Zacks Computer and Technology sector are Analog Devices ADI, Applied Materials AMAT and Cisco Systems CSCO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Analog Devices have rallied 37.1% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, indicating an increase of 59.4% year over year.

Shares of Applied Materials have skyrocketed 101.1% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.14 per share, up by 4 cents over the past 30 days, indicating a rise of 28.9% year over year.

Cisco Systems shares have surged 48.7% year to date. The Zacks Consensus Estimate for CSCO’s fiscal 2026 earnings is pegged at $4.28 per share, unchanged over the past 30 days, indicating an increase of 12.3% year over year.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research