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Snap Inc. shares shot higher in the extended session Tuesday after Snapchat’s parent company revealed advertising revenue rose above estimates that were diminished by fears of the spread of COVID-19.
But the company said it was experiencing slowing ad growth in March and April.
“Thus far in Q2 we estimate year-over-year revenue growth to be 15% through April 19th, and our estimated growth rate in the most recent week is 11%,” said Snap Chief Financial Officer Derek Andersen, in prepared remarks.
Snap reported a first-quarter net loss of $305.9 million, or 21 cents a share, versus a loss of $310.4 million, or 23 cents a share, in the year-ago period. Adjusted for stock-based compensation, among other items, the company said adjusted losses were 8 cents a share. Revenue rose to $462.5 million from $320.4 million in the year-ago period.
Analysts surveyed by FactSet had estimated a net loss of 20 cents a share on revenue of $423.7 million, with sales expectations declining from $468.6 million. For the second quarter, analysts model a net loss of 20 cents a share on revenue of $411 million.
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Shares of Snap SNAP, -3.71% surged more than 20% in the extended session Tuesday.
Snap reported daily active users rose 20%, to 229 million daily active users in the first quarter, versus 190 million a year ago. Wall Street analysts modeled daily active users to grow to 225 million in the first quarter. Snap said it expected daily active users to rise roughly 18% to 239 million in the second quarter compared with a year ago.
The company said that communications with friends increased by over 30% in the last week of March compared with the last week in February, with more than a 50% increase in some places around the world. Snap also said that the time spent playing games in its app has doubled in March, and has seen a 30-fold increase in the daily downloads of its Snap Camera, which people use for videoconferences and live streaming.
“We are seeing sustained communication volumes on our service that eclipse the peaks we see during major holidays,” Chief Executive Evan Spiegel said in prepared remarks.
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The company said it doubled the amount of money committed to the company via upfronts in 2020 versus a year ago, that direct response advertising has doubled as a share of its revenue over the past two years, amounting to half of total revenue.
“While many advertising budgets declined due to COVID-19, we experienced high revenue growth rates in the first two months of the quarter which offset our lower growth in March” Spiegel said. “These high growth rates in the beginning of the quarter reflect our investments in our audience, ad products, and optimization, and give us confidence in our ability to grow revenue over the long term.”
The company said it had $2.1 billion in cash and marketable securities and a credit line of $1 billion.
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As people around the world have increased their use social-media and internet usage in general amid the coronavirus pandemic, Snap is the first internet company to report earnings this season. Facebook Inc. FB, -4.17% already detailed some of those ad issues earlier this year and Bernstein analyst Mark Shmulik wrote in a note that Snap’s Snapchat app is “the experimental platform that’s susceptible to budget cuts.” The vast majority of the company’s revenue is from Snapchat advertising revenue.
Snap stock has gained 8% in the past year, with the S&P 500 index SPX, -3.06% falling 2.8%.
