Snap Q2 2025 Earnings Report

Snap EPS Results

• Actual EPS: -$0.16
• Consensus EPS: -$0.16
• Beat/Miss: Met Expectations
• One Year Ago EPS: -$0.15

Snap Revenue Results

• Actual Revenue: $1.34 billion
• Expected Revenue: $1.34 billion
• Beat/Miss: Beat by +$4.13 million
• YoY Revenue Growth: +8.70%

Snap Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 5:00PM ET

Snap (NYSE:SNAP) operates as a technology company in North America, Europe, and internationally. The company offers Snapchat, a visual messaging application with various tabs, such as camera, visual messaging, snap map, stories, and spotlight that enable people to communicate visually through short videos and images. It also provides Spectacles, an eyewear product that connects with Snapchat and captures photos and video from a human perspective; and advertising products, including AR ads and Snap ads comprises a single image or video ads, collection ads, dynamic ads, story ads, and commercials. The company was formerly known as Snapchat, Inc. and changed its name to Snap Inc. in September 2016. Snap Inc. was founded in 2010 and is headquartered in Santa Monica, California.

Snap Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In Q2 Snap reached 932 million monthly active users, up 7% year-over-year, moving closer to its 1 billion user goal.
• Positive Sentiment: Revenue grew 9% year-over-year to $1.34 billion, driven by strong demand from small and medium-sized advertisers, while other revenue jumped 64% as Snapchat Plus reached 16 million subscribers.
• Positive Sentiment: Snap generated $41 million of adjusted EBITDA and $24 million of free cash flow in Q2, ending the quarter with $2.9 billion in cash and marketable securities.
• Negative Sentiment: An ad platform change in Q2 caused some campaigns to clear at reduced prices, contributing to a 4% ad revenue growth slowdown and a 10% year-over-year drop in average eCPM.
• Positive Sentiment: Building on over $3 billion in AR investments over 11 years, Snap announced its first standalone AR glasses Specs for a 2026 launch and continues to expand its AR developer ecosystem.

Presentation

[Operator]

Good afternoon, everyone, and welcome to Snap Inc. Second Quarter twenty twenty five Earnings Conference Call. At this time, are in a listen only mode. I would now like to turn the call over to David O'Meader, Head of Investor Relations.

[David Ometer, Head - IR & Capital Markets at Snap]

Thank you, and good afternoon, everyone. Welcome to Snap's Second Quarter twenty twenty five Earnings Conference Call. With us today are Evan Spiegel, Chief Executive Officer and Co Founder and Derek Anderson, Chief Financial Officer. Please refer to our Investor Relations website at investor.snap.com to find today's press release, earnings slides and investor letter. This conference call includes forward looking statements, which are based on our assumptions as of today.

[David Ometer, Head - IR & Capital Markets at Snap]

Actual results may differ materially from those expressed in these forward looking statements, and we make no obligation to update our disclosures. For more information about factors that may cause actual results to differ materially from these forward looking statements, please refer to the press release we issued today as well as risks described in our most recent Form 10 ks or Form 10 Q, particularly in the section titled Risk Factors. Today's call will include both GAAP and non GAAP measures. Reconciliations between the two can be found in today's press release. Please note that when we discuss all of our expense figures, they will exclude stock based compensation and related payroll taxes as well as depreciation and amortization and certain other items.

[David Ometer, Head - IR & Capital Markets at Snap]

Please refer to our filings with the SEC to understand how we calculate any of the metrics discussed on today's call. With that, I'd like to turn the call over to Evan.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Hi, everybody, and welcome to our call. In q two, we made exciting progress on our long term strategy to grow our community, enhance value for advertisers, and invest in the future of augmented reality. Enriching relationships between friends and family is central to our mission, and we continue to build products that bring people together and spark conversations among Snapchatters from messaging and maps to personalized content and AR experiences. Our team's continuous innovation was evident as we reached 932,000,000 monthly active users in q two, an increase of 64,000,000 or 7% year over year, moving us closer to our goal of serving 1,000,000,000 Snapchatters around the world. Our large and hard to reach audience, brand safe environment, and performance advertising platform continues to make us a valuable partner for businesses looking to grow with Gen z and millennials.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

One of the many things that sets Snapchat apart is the unique space that provides Snapchatters to feel free to express their creativity and maintain close relationships without the pressures of public performance. This authentic communication and self expression is a key differentiator in the crowded digital landscape because it empowers brands to build strong relationships with their audience. Revenue increased 9% year over year to reach $1,340,000,000 in q two, driven primarily by the continued growth of our small and medium customers and delivery against lower funnel objectives. Snapchat Plus approached 16,000,000 subscribers in q two and was the primary driver of other revenue, growing 64% year over year to reach an annualized run rate of nearly $700,000,000. To build on this momentum, we introduced Lens plus a new Snapchat plus subscription tier that offers access to exclusive new AI video lenses, emoji game lenses, as well as early access to new features.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

We continue to focus on aligning our investments with our core strategic priorities while improving financial performance. In Q2, we delivered $41,000,000 of adjusted EBITDA and generated $24,000,000 of free cash flow as we continue to make progress towards profitability while generating consistent and meaningful free cash flow. We ended the quarter with $2,900,000,000 in cash and marketable securities, providing financial flexibility to invest in our future. We have made a long term and consistent investment in augmented reality, committing more than $3,000,000,000 over the past eleven years to develop the world's only full stack vertically integrated augmented reality platform. With one of the world's largest AR developer communities, purpose built developer tools, proprietary rendering engine, our own highly optimized operating system, our own optical engine, as well as the design of the hardware itself, our tight control over each aspect of the hardware and software allow us to deliver a product experience that is unmatched.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

We're excited about our progress as we work to make specs available to the public in 2026. While we are moving quickly to realize the full potential of our business, we believe there is an opportunity to better align Snap's engineering and technology investments with our business priorities. We will be distributing our engineering teams to directly support our business functions with our core applications team reporting to Bobby Murphy, cofounder and chief technology officer, and our monetization engineering team reporting to Ajit Mohan, our chief business officer. Our chief information officer and chief information security officer will report to me and lead enterprise wide foundational infrastructure and platform integrity. This new distributed structure will empower our teams to take greater ownership and drive continued innovation for our community and advertising partners.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

We are grateful to Eric Young, SVP of engineering, for his contributions and wish him all the best as he departs to pursue a new opportunity. Snapping with friends and family is at the core of our service, driving daily engagement and long term retention. In q two, we introduced several features to make communication faster, easier, and more fun. We launched the Snapchat app on Apple Watch, allowing Snapchatters to preview incoming messages and respond using the keyboard, scribble, dictation, or emojis. Leveraging our investments in AI and machine learning, we enhanced group suggestions to help people connect more easily with their closest friends.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Our video chat feature continues to strengthen real connections with Snapchatter spending 30% more time video chatting year over year in q two. These updates highlight our ongoing commitment to enriching the Snapchat experience through visual communication and fostering deeper connections amongst our community. Global time spent watching content and the number of content viewers increased year over year in q two, reflecting the multiyear investment in our machine learning infrastructure and the continued growth in Spotlight. In q two, we began testing our largest mixed feed model to date, which reduced training time by half and led to an increase in content view time growth. These strategic investments and improvements have been fundamental in Spotlight reaching an average of more than five fifty million monthly active users.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Time spent on Spotlight grew 23% year over year in q two and now contributes more than 48% of total time spent watching content. In q two, we introduced a suite of new tools and features that make it easier for Snapstars to create and share content. Creators can now generate videos from their saved memories using templates, and they have access to new insights like returning viewers, top content, and total view time, which will enable creators to optimize their content to deepen their relationship with their audience and receive rewards for posting. Over the past year, we onboarded thousands of creators to our Snapstar program, driving strong momentum with the number of spotlight posts by Snapstar is growing more than 145 year over year in North America in q two. As part of our efforts to strengthen real world connections among close friends, we acquired Saturn, a social calendar app that helps high school and college students manage and share their class schedules.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Saturn transforms calendaring by orienting it around friends to make time management feel intuitive and fun. Students from over 80% of US high schools use Saturn with their friends to organize their day. We are excited to support Saturn's growth and explore ways to integrate its calendaring expertise into Snapchat in new and innovative ways. Augmented reality continues to empower creativity and drive engagement on Snapchat. Snapchatters use AR Lenses in our camera more than 8,000,000,000 times each day, and over 400,000 creators from every country have built more than 4,000,000 Lenses using our industry leading AR tools.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

In q two, more than 350,000,000 Snapchatters engaged with AR every day on average. Our nineties school photos, AI Lens, different eras, AI Lens, and cartoon world AI Lens were collectively viewed over 1,000,000,000 times in q two, highlighting strong engagement with our latest AR experiences powered by generative AI. Much of this momentum is driven by our growing AR creator and developer ecosystem. Lens Studio, our desktop offering tool, has helped foster a global community of professional developers by giving them powerful tools to create innovative AR experiences. We have made AR creation increasingly more accessible with Easy Lens, an AI tool that empowers Lens creators to build a Lens in just minutes by typing out a prompt for the Lens that they want to create.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

In q two, we expanded access with the introduction of the Lens Studio iOS app and a new web based Lens Studio creation tool at lensstudio.snapchat.com. While the desktop version of Lens Studio remains the primary tool for professional developers creating advanced and more sophisticated AR experiences across Snapchat, partner apps, and Spectacles, These new tools are designed to help more people at all skill levels get started with AR. To support creators building Lens games, our latest Lens Studio update includes new features that simplify development. These include the new Bitmoji suite for enhanced personalization and animation that makes it easier to bring three d Bitmoji avatars to any game environment along with new game assets, including leaderboards and multiplayer features built specifically for Snapchat. As a result, games engagement on Snapchat has continued to grow, now reaching more than 175,000,000 monthly active users, up over 40% year over year.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

We believe games represent a compelling long term opportunity for driving engagement on Snapchat and eventually new monetization opportunities for creators and our business. In q two, we announced plans to publicly launch our first fully standalone lightweight specs AR glasses in 2026, marking an exciting milestone for our company and a critical step toward realizing our long term vision for augmented reality. Snap is uniquely positioned as the only company in the world with a fully integrated AR computing stack. Our upcoming specs represent a leap forward in human centered computing. It will be significantly smaller, lighter, and more capable than our fifth generation Spectacles released to developers in 2024.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

By combining advanced machine learning and AI with spatial intelligence, Specs will enable users to interact with computing in fundamentally new ways, delivering digital experiences embedded directly into the world around us. Our developer community continues to build new and compelling use cases and creative Lenses for specs. Recently launched Lenses for specs include Goa's SuperTravel for real time translation and currency conversion, Paradiddle's drum kit for interactive music learning overlaid on a physical drum set, and ANRK's pool assist to help players make better shots while playing pool. These examples demonstrate how specs seamlessly integrate computing experiences into three-dimensional space, enabling practical utilities, enriching educational experiences, and fostering imaginative new forms of entertainment. To build on this momentum, we introduced updates to SnapOS and new tools to unlock deeper AR capabilities.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

AI powered experiences with OpenAI and Gemini on Google Cloud, in addition to hosted open source models, now enable the creation of sophisticated multimodal AI powered lenses. Additionally, our new automated speech recognition API supports real time transcription across dozens of languages, and the Snap three d API empowers developers to generate three d objects on the fly from any prompt. Future enhancements, including a new partnership with Niantic Spatial to develop a shared AI powered map of the world and our recently announced WebXR support will further expand the utility and accessibility of our AR platform and help our developer community build more unique industry leading experiences in advance of the public launch of specs next year. We have made significant progress across our advertising platform by focusing on three core priorities, advancing our AI and ML capabilities with privacy safe signals, optimizing ad formats and tools for performance, and improving our go to market strategy with a strong focus on SMBs. In q two, we further enhanced our AI and ML capabilities, leading to meaningful improvements in ad platform performance, particularly in conversion attribution, real time personalization and product relevance.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

This contributed to seven zero purchase volume increasing 39% year over year for commerce advertisers and total purchase related ad revenue growing more than 25% year over year in q two. We continue to innovate on our ad offerings, and in June, we expanded sponsored Snaps in The US and several other regions globally, activating all Pixel and App Doctor objectives. We also introduced First Snap, a single day takeover format that delivers the first sponsored Snap in the chat inbox. Sponsored Snaps enable advertisers to show up like a Snapchatter, helping them build authentic relationships with our community. Sponsored Snaps are proving highly effective in driving incremental conversions, delivering up to a 22 increase when included in an advertiser's broader Snap campaign mix.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Sponsored Snaps represent a significant new pool of inventory for our advertising business and an opportunity to reach our unique audience directly and natively within our highest engagement surface, the chat inbox. In the near term, this is delivering ROI for advertisers in the form of incremental reach and additional conversions that we believe will translate into incremental top line growth over time as we build demand and continue to enhance the performance of this new product. We continue to make meaningful progress in app direct response performance. Notably, sponsored snaps are now driving an 18% lift in unique converters across app installs and app purchases. We recently began testing app end cards that reinforce advertiser messaging and guide users to a conversion at the end of the snap ad and are delivering a 19% average boost in scan installs.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

In addition, we have delivered core ML improvements and introduced smarter tools like target cost bidding to deliver performance and scale while remaining within an advertiser's cost constraint. Our investment in automation continued with the launch of Snapchat Smart Campaign Solutions, an AI powered suite designed to enhance campaign performance and simplify advertiser workflows. This suite includes smart bidding, which dynamically adjusts bids to achieve a desired cost per action. For example, I Can, I Will, a leading European sportswear brand, saw their ROAS double and conversion volume increased by 80% while reducing their cost per action by 50% after implementing smart bidding? We're also encouraged by initial testing of smart budget, which automatically adjust campaign budgets across assets, and the alpha testing of auto targeting, which leverages AI to identify and reach high value users.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

We continue to enhance our go to market operations in q two with particular focus on better serving our growing community of SMB advertising partners. SMBs were the largest contributor to ad revenue growth in q two driven by a combination of more performant Doctor products, improved go to market operations, and a simplified ad buying experience. For example, Wizbee Money, an online financial services tool in France, leveraged smart bidding on Snapchat to significantly lower their cost per acquisition, resulting in a 77% improvement in eCPM and a 69% improvement in cost per click, making Snapchat one of their top performing acquisition channels. Looking ahead, we see significant opportunities to further enhance return on advertising spend by deepening our investments in AI machine learning, delivering innovative ad formats across the entire funnel, and enhancing the tools and insights that help our advertising partners optimize their campaigns. These ongoing efforts are aimed at ensuring Snapchat remains a high performing and increasingly automated platform for all of our advertising partners.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

With that, I'd like to turn it over to Derek to share more about our financial progress.

[Derek Andersen, CFO at Snap]

Thanks, Evan. We continued to drive robust growth in our global community in Q2, with DAU reaching four sixty nine million dollars an increase of $37,000,000 or 9% year over year, including $98,000,000 DAU in North America, 100,000,000 in Europe and $271,000,000 in rest of world. North America MAU was $159,000,000 in Q2 and flat on a year over year basis, while North America unique SNAP senders grew 2% year over year, which is an important input to long term retention. As our global community continues to grow, we have continued to scale our top line with total revenue reaching $1,345,000,000 in Q2, up 9% year over year. Our rate of top line growth was impacted by a number of factors in Q2, including an issue related to our ad platform, the timing of Ramadan and the effects of the de minimis changes.

[Derek Andersen, CFO at Snap]

Unfortunately, in our efforts to improve advertiser performance, we shift a change that caused some campaigns to clear the auction at substantially reduced prices. We have since reverted this change, and advertising revenue growth has improved as advertisers adjust their bid strategies to achieve their objectives. Despite these headwinds, advertising revenue reached $1,174,000,000 in Q2, up 4% year over year, driven primarily by growth from Doctor advertising revenue, which increased 5% year over year. The growth in Doctor revenue was driven by strong demand for our pixel purchase and app purchase optimizations, as well as continued strength from the SMB client segment. We continue to benefit from strong spotlight and creator stories engagement in Q2 as well as early contributions from sponsored snaps, And these factors contributed to total impressions growth of 15% year over year and our average eCPM declining 10% year over year.

[Derek Andersen, CFO at Snap]

As we continue to build demand across these new drivers of impression growth, we anticipate that they will be increasingly accretive to top line growth over time. Sponsored snaps remain a large incremental revenue opportunity as they appear on the most frequently used surface in Snapchat. While we have implemented strict frequency caps to responsibly manage the rollout for our community, sponsored snaps are contributing to meaningful impression growth and incremental reach in our most highly monetized markets thus far in q three. This increased supply has initially reduced auction contestation and lowered platform wide eCPMs. We expect that these impressions will lead to improved performance for advertisers that will help to build incremental demand and make sponsored snaps increasingly accretive to top line growth over time.

[Derek Andersen, CFO at Snap]

Other revenue increased 64% year over year to reach 171,000,000 in q two, with the largest driver being Snapchat Plus subscribers approaching 16,000,000 in Q2, an increase of 42% year over year. To build on the momentum we are seeing in our subscription products, we introduced Lens Plus in Q2, which is a new Snapchat Plus subscription tier, offering access to new and exclusive Lenses. Adjusted cost of revenue was $650,000,000 in q two, up 11% year over year. Infrastructure costs were the largest driver of the year over year increase due in large part to our investments in ML and AI models to drive improved advertiser performance and content personalization as well as the continued strong growth in our global community. Infrastructure cost per DAU was $0.84 in Q2 and within our full year guidance range of $0.82 to $0.87 The remaining components of adjusted cost of revenue were $257,000,000 in Q2 or 19% of revenue, which is in line with the prior quarter and within our full year cost structure guidance range of 19% to 20%.

[Derek Andersen, CFO at Snap]

Adjusted operating expenses were $654,000,000 in Q2, up 10% year over year. Personnel costs increased 10% year over year, driven by a 10% year over year increase in full time headcount, With hiring focused on our core strategic priorities, including improvements to our ad platform and advertising performance, our efforts to drive more personalized and fresh content, and the drive to expand our leadership in AR. Higher legal costs, including litigation and regulatory compliance related costs, were an additional driver of cost growth in Q2. Adjusted EBITDA was $41,000,000 in Q2 compared to $55,000,000 in Q2 of the prior year. Net loss was $263,000,000 in Q2 compared to a net loss of $249,000,000 in Q2 of the prior year.

[Derek Andersen, CFO at Snap]

The $14,000,000 higher net loss year over year largely reflects the flow through of a 14,000,000 decline in adjusted EBITDA, a $22,000,000 increase in interest expense, offset by a $16,000,000 improvement associated with the early retirement of convertible notes in Q2 of last year. Free cash flow was $24,000,000 in Q2, while operating cash flow was $88,000,000 Over the trailing twelve months, free cash flow was $392,000,000 and operating cash flow was $587,000,000 as we continue to balance investments with top line growth to deliver sustained positive cash flow. Dilution or the year over year growth in our share count was 1.6% in Q2. As part of our efforts to responsibly manage the impact of SBC on our share count, we repurchased 30,000,000 shares at a cost of $243,000,000 in Q2. We ended Q2 with 2,900,000,000 in cash and marketable securities on hand.

[Derek Andersen, CFO at Snap]

We believe that our robust free cash flow generation and the strength of our balance sheet ensure that our business has the capital and financial flexibility to invest in our core strategic priorities to drive long term growth. As we enter Q3, we anticipate continued growth of our global community. And as a result, our Q3 guidance is built on the assumption that DAU will be approximately $476,000,000 in Q3. Our Q3 guidance range for revenue is $1,475,000,000 to 1,505,000,000 We believe it is prudent to continue to balance our level of investment with realized revenue growth and are updating our full year cost structure guidance to reflect our current investment plans. For infrastructure cost per DAU, we maintain our full year guidance range of $0.82 to $0.87 per quarter and anticipate we will be in the top half of this range in Q3 as we continue to prioritize investments in ML and AI infrastructure to drive improvements in our ad platform and depth of content engagement.

[Derek Andersen, CFO at Snap]

For all other costs of revenue, we maintain our full year cost guidance at 19% to 20% of revenue and anticipate we will be within this range in Q3. For adjusted operating expenses, we are maintaining our range of 2,650,000,000.00 to $2,700,000,000 For stock based compensation, we are lowering our full year cost guidance from the prior range of $1,130,000,000 to $1,160,000,000 to a new range of $1,100,000,000 to $1,130,000,000 which implies a $30,000,000 reduction at the midpoint. Given our updated full year cost guidance and our investment plans for Q3, we estimate that adjusted EBITDA will be between $110,000,000 and $135,000,000 in Q3. Moving forward, we will remain focused on executing against our strategic priorities of growing our community and improving depth of engagement, driving top line revenue growth and diversifying our revenue sources and building towards our long term vision for augmented reality. Thank you for joining our call today, and we will now take your questions.

[Operator]

Thank you. We will now begin the question and answer session. The first question comes from Ross Sandler with Barclays. You may proceed.

[Ross Sandler, MD & Senior Internet Research Analyst at Barclays Capital]

Hi, guys. Just one question and one housekeeping question. I guess that's two total. So you sound pretty optimistic about what you're seeing early on with sponsored snaps. We know that's a big opportunity given how much traffic that surface sees within the app.

[Ross Sandler, MD & Senior Internet Research Analyst at Barclays Capital]

So, you know, could you talk about what you saw in 2Q and and the longer term vision for for this new ad unit? And then the housekeeping question is on the auction pricing issue in the quarter, could you just elaborate on what happened there? And what would have ad revenue grown had that not happened? A lot.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Hey, Ross. Thanks so much for the question. The rollout of sponsored snaps is definitely a very meaningful and profound evolution of our ad business, you know, because sponsored snaps really bring a native and highly performing ad placement to the most frequently used surface in Snapchat. So, you know, so far, sponsored snaps have driven meaningful growth in both incremental reach and conversions for advertisers who utilize the placement, and we've been seeing some really great engagement from users as well. So, you know, after opening a sponsored snap from the chat feed, users exhibit significantly higher engagement per full screen ad view, driving a two times increase in conversion, the five x increase in click to convert ratios, and a two x increase in website dwell times compared to other inventories.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

So I think the early signs are are very positive. Of course, this is a a profound shift in terms of available inventory on the service, so we've tried to be really thoughtful about managing the supply growth, you know, with things like frequency caps and relevancy filters as we work to build more demand against, this new inventory. I'll, I'll let Derek speak to the sort of revenue pacing throughout the quarter.

[Derek Andersen, CFO at Snap]

Hey there, Ross. It's Derek speaking. So, you know, I think digging in on the impact in the quarter on the on the revenue, there are really multiple factors that we looked at in the quarter. One of them certainly is the one you mentioned around the ad platform. We also had a factor around the timing of Ramadan, which was less of a benefit in q two than in the prior year.

[Derek Andersen, CFO at Snap]

And as well, there was the impact of the de minimis changes in the quarter. So each of those were a factor. I think maybe one of the things that could help a little bit in terms of understanding the relative impact of things will be to talk about the topography of ad revenue growth specifically over the last number of months, as some of these shifts have come into the business. So if you recall, we grew ad revenue at a rate of approximately 9% in q one. And what we saw in April is that ad revenue growth, declined to approximately 1% before largely recovering as we moved through May.

[Derek Andersen, CFO at Snap]

And and what you saw in May is, number one, we'd gone to the work of reverting the ad, platform change, but also the factor around Ramadan obviously being diminished during that period of time. So we saw the recoveries who went through May. That really gave us the confidence, you know, to be able to roll out sponsored snaps more broadly both from a regional and bidding objective perspective as we moved into June. And so that's where we've seen, you know, a little bit of the the impact of all of this, inventory that Evan just spoke about, and how that's translated into, you know, lower platform wide eCPMs and some of, you know, obviously, pricing for our advertisers where a lot of that benefit is occurring at the moment. So the big focus at this point is building demand.

[Derek Andersen, CFO at Snap]

You know, we have seen, you know, post the rollback of the ad change as we move through June and into July, we've seen ad revenue specifically growing at a rate between three to 4%. So it'll give you a sense of how the topography sort of moved from nine in q one to approximately 1% for ad revenue in April then to a rate of, you know, recovering largely in May, and then we're looking at three to four post the rollback of that change. So, hopefully, that gives you a better sense of how things have evolved as we've moved through these different factors, and we're excited now about ramping the demand into these new ad units and the performance that we're delivering for our ad partners, with this new inventory. Hopefully, that's helpful. Thank you.

[Operator]

Thank you. The next question comes from Rich Greenfield with LightShed Partners. You may proceed.

[Richard Greenfield, Partner, Media & Technology Analyst at LightShed Partners]

Hi. Thanks. You know, I guess, just to sort of play off on let me just do a housekeeping first. You you you've obviously just were talking about a lot of the factors that hit Doctor, Derek, in that last answer. Could you give us a sense of what brand looks like?

[Richard Greenfield, Partner, Media & Technology Analyst at LightShed Partners]

Obviously, I assume most of the impact that we saw on the bidding related to Doctor and that dropped from mid teens to, 5% this quarter. If you could just give us a sense of, like, what's happening with brand advertising, because I don't think you, disclosed it this quarter versus the past. And then maybe just a big picture question for Evan. I think watching you, Evan, you know, you've spoken on a bunch of podcasts. You've been, done a bunch of interviews in the last several months.

[Richard Greenfield, Partner, Media & Technology Analyst at LightShed Partners]

You clearly have a a a true passion for what you're building in AR and specs, are gonna roll out next year. If you could just maybe spend a minute we've obviously heard, both Meta and Google talk about their sort of plans for AR and glasses in the last several weeks. How does Snap's approach fundamentally differ? And then the the piece of that is, do you have the capital to pursue the vision on your own, or do you need partners to bring this to fruition, as you move forward? Thanks so much for taking the questions.

[Derek Andersen, CFO at Snap]

Rich. Thanks for the questions. I'll take the first one. So yes, correct. The majority of the deceleration quarter over quarter showed up in the Doctor advertising revenue.

[Derek Andersen, CFO at Snap]

So we saw total ad revenue in Q2 was at 4% year over year. We saw the Doctor ad revenue up 5% year over year, as you had mentioned. And, brand advertising revenue was flat in Q2, so that slight improvement over the growth rate in the prior quarter. So hopefully, that gives you a little bit of the sense of the topography of the revenue between the different splits there of Doctor and brands. And and, obviously, in terms of the auction, you know, impact issue, yeah, that accrued largely to the Doctor advertising line. So hopefully, that provides a little more context.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Thanks, Rich, for the question. Yeah. We're we're incredibly passionate about the opportunity to reinvent the computer. People are spending more than seven hours a day now on average staring down at screens, and I think even just moving a couple hours of that to looking out at the world through, you know, see through lenses and a pair of glasses can make a meaningful difference for people's well-being, but also the way they interact with computing and and AI in general. So the opportunity is enormous.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Obviously, this is a space we've been committed to. Actually, since before Snapchat had chat, so more than, I guess, eleven years now. And I think, you know, really, fortunately, that's given us the time to compound our our technical advantage and to build out our fully vertically integrated stack. Obviously, you know, to be able to achieve the performance in such a small form factor, really controlling every aspect of the stack, you know, from the developer tools to the rendering engine to the operating system to the optical engine really helps us deliver, I think, a really compelling product experience. And, of course, we benefit from the huge developer ecosystem we have today.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

You know, people use Lenses in Snapchat, you know, more than 8,000,000,000 times every day. There's hundreds of thousands of developers who built millions of Lenses. And so I think, you know, to already have such a a a strong, thriving developer community, I think, is a real advantage for us, you know, as we, you know, prepare for this launch next year. I think, you know, as it as it pertains to sort of the the capital requirements, I guess, what, over the last trailing twelve months, we've generated close to $400,000,000 in in free cash flow while investing in our long term vision for specs and and really reinventing computing. So I think from a capital perspective, you know, our our own cash flow generation, obviously, the core Snapchat business generates a lot of cash.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

We've been able to to reinvest that, and I think that, you know, that's probably the lowest cost of capital we we have. But, from a partnership perspective, I think there's a real opportunity to work with partners to bring specs to market. And so that'll be a big focus for us, obviously, in the lead up to the launch. Thanks.

[Operator]

Thank you. The following comes from Mark Smolik with Bernstein. You may proceed.

[Mark Shmulik, MD & Senior Analyst - US Internet at AB Bernstein]

Yes. Thanks for taking the questions. I appreciate the color around how, you know, time spent with content is growing. Any color you can share on how kind of time spent with, like, snapping with friends and family has been tracking, perhaps particularly in The US where I think users declined by about a million? And then secondly, Snapchat Plus growth continues to track real well.

[Mark Shmulik, MD & Senior Analyst - US Internet at AB Bernstein]

I think it's mid teens revenue contribution here. So I think we're now like three years into this product. I'm just wondering how your thinking has kind of evolved around how meaningful this business can be going forward. Thank you.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Yeah. Thanks, Mark. Certainly, we're excited about the growth, for example, in things like calling. We talked a bit about that earlier in the call. I think we've seen calling growth with friends and family grow something like 30%, year over year, which has has been really encouraging.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

In North America, in particular, Snap Send unique users, grew by 10 per oh, sorry, 2%, year over year. And North America MAU was flat year over year at a a 159,000,000. So we did see a slight decline in active days. Our our focus, you know, on on driving daily engagement is really around supporting communication between friends and family, you know, and and, of course, continuing to improve the the content experience as well. We've got some new products landing later this year, so we're excited about that.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

The team's heads down focusing on getting that out the door. In in terms of other revenue or direct revenue business, the the growth has has really continued nicely. I mean, we've we've achieved a $700,000,000 annual run rate, growing 64% year over year. So that that revenue is becoming much more meaningful to the business, and we see a lot of opportunity to continue to develop, the Snapchat Plus product, but also new products like Lens Plus and and potentially some new offerings around, creators on Snapchat as well. So, I I think it's just a testament to the deep engagement, you know, people have with with Snapchat and and certainly our ability to continue to deliver new value, that folks are are willing to pay for.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

So it's been a a a really exciting area of growth in the business and I'm looking forward to investing more there.

[Operator]

Thank you. The next question comes from Mark Mahaney with Evercore. You may proceed.

[Mark Mahaney, Senior MD at Evercore ISI]

Okay. Two questions, please. You talked about that, Derek, at the end, stock based compensation coming down. Just any color on the why? Is it just a new approach to how you're thinking about stock based compensation as an expense item?

[Mark Mahaney, Senior MD at Evercore ISI]

And then secondly, going back to I know you've got a lot of interesting new monetization and sponsored snaps. But going back to just the core spotlight not the core, but the spotlight monetization, where are you on that? How do you feel about the progression of that, maybe not just in the quarter, but for the next year or two, your level of confidence in where you are in terms of load, level of targeting, monetization, advertiser interest?

[Derek Andersen, CFO at Snap]

Mark, it's Derek speaking. On the SBC side, yes, the note there is we took down the full year cost structure guidance for SBC at the midpoint of that range for the full year, about $30,000,000 lower than we've been in the prior quarter. That's the second reduction we've made to that estimate for the full year this year. So we're trying to be very careful and focused in our hiring, trying to make sure that our hiring is laser focused on our core strategic priorities. And so as we've been able to manage that ramp and and balance out the level of investment in the business relative to our observed growth and top line to make sure that we're doing well, you know, on profitability and progress towards profitability over time.

[Derek Andersen, CFO at Snap]

That balance is really showing up there. So thanks for noticing that, and and we'll keep updating folks each quarter as we make progress there.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Thanks, Mark. Yeah. On on the spotlight monetization front, certainly, spotlight revenue has become an increasing share of revenue overall, and that's been really exciting to see. We're we're doing some experiments around sort of more contextual placements, which we're excited about and and gonna continue to explore further. But overall, you know, that that inventory tends to perform quite well. I think, you know, the the dwell times and sort of high consideration of that inventory is is helpful for direct response advertisers. So, you know, we're we're also iterating on formats, but, yeah, generally, you know, excited to see the the the progress on Spotlight monetization.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

And now that, you know, Spotlight total time spent is about 40% of time spent overall, it's just becoming a more meaningful part of the business.

[Operator]

Thank you. The next question comes from Justin Post with Bank of America. You may proceed.

[Justin post, Managing Director at Bank of America Merrill Lynch]

Great. Thanks. Just wondering if maybe you could outline some initiatives that you're really excited about to kind of maybe reaccelerate U. S. DAUs?

[Justin post, Managing Director at Bank of America Merrill Lynch]

And then second on the guidance, it kind of implies similar growth despite the challenges in Q2. How are you thinking about the ad revenues embedded in there? And do you see opportunity for acceleration as especially sponsor snaps gets more implemented? Thank you.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

In in terms of, North America user engagement, I I think, know, one of the the biggest shift shifts has really been, you know, from posting stories for friends to sharing content, you know, that you find in in Spotlight or or stories and and sending that to your friends to start a conversation. So historically, people would start conversations by replying to a friend's story. That obviously still happens quite frequently today, but we've also seen the rise in content sharing as really a conversation starter and catalyst. So we're you know, on the innovation front, we've been thinking a lot about new parts of the the service that can help sort of inspire or kick start, conversations. And, you know, as we think about, innovation and landing some new products later in the year, that that'll really be a focus area.

[Derek Andersen, CFO at Snap]

Hey. And just in terms of, you know, what we're seeing in terms of opportunity for growth in q three, you likely heard me say earlier that, you know, since we've rolled back the ad platform issue, we're seeing ad revenue growth in the sort of 3% to 4% range. So that correlates pretty closely to the guidance range that we're seeing for q three on total revenue. Maybe it went for a point of improvement as we move through the quarter. The big thing we see there obviously is, number one, continuing the momentum we're seeing in direct monetization and other revenue, but also, you know, the work that we're gonna be doing to build demand into sponsored snaps.

[Derek Andersen, CFO at Snap]

The one thing I'll note there is too is just comps that we moved through the quarter. There are obviously some big items last year with, Olympics and so on. So we're gonna be working to overcome that too. And so the teams will be working hard to build demand into this new inventory and make sure that we power through those things as we go through the quarter. So largely reflective of the rate of growth that we're seeing today, maybe a little bit of improvement as we move through the quarter and execute. Hopefully, that gives better context.

[Operator]

The following question comes from Eric Sheridan with Goldman Sachs.

[Eric Sheridan, Managing Director at Goldman Sachs]

Taking the question. Maybe building on Rich's question earlier that was sort of anchored around Spectacles and AR and where you're going longer term. Evan, I'd love to broaden out the question and talk a little bit more about the wider ecosystem when you think about how user interfaces might evolve from the current formatting to where you wanna take them over the medium to long term, and how you think about the role of content and AI at the center of some of those experiences they move more towards spectacles, and how much of those dynamics around content or AI you feel you need to own, operate, build yourself rather than possibly build in partners and other ways to possibly scale those initiatives? Thanks so much.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Yeah. Thanks so much for the question. Obviously, it's been so exciting to see the developments in AI, and I think they're really helping accelerate our vision around making computing more human. Our AI investments are really focused on areas where we think we can differentiate. So we've we've done a lot around image and video generation, especially with on device models, which, you know, are are really helpful in terms of scaling that capability to our entire community without, you know, any incremental cost, you know, for for them, for example.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

You know, and things like three d generation as well. If you kinda think about the future of user interfaces or the future of Lenses in general, I think it's, you know, quite likely that a lot of those experiences will be generative as well. So if you have a chance to try out our new EZLens tool, there's a a Lens Studio web tool that's available now where you can create an augmented reality lens with just a prompt. And I think as we look forward to, you know, the types of experiences people will be able to have with AR glasses, I think we're quickly moving to a world where those sorts of experiences can be generated on the fly. And, again, that's an opportunity where we think we can really differentiate, especially because we have developed the the developer tools ourselves and supported this developer ecosystem.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Developers can actually, you know, plug in to to these very various Lens Studio tools as well and and design their own plug ins. So I I think just just looking towards the the future here, we're gonna invest where we can differentiate. Of course, having, you know, the the glasses form factor allows you to provide much more contextually relevant computing experiences to understand not only, you know, what's on the the screen or the lens per se, but also the world around you. And and and we think that that we can really build a competitive advantage there over time.

[Operator]

Thank you. The next question comes from Dan Salmon with New Street Research. You may proceed.

[Dan Salmon, Lead Analyst - US Internet at New Street Research]

Great. Good afternoon, everyone. Evan, could you take us a little deeper on your small and medium customer base? Maybe any color on the growth of the SMC count or broader total advertiser growth you can add? And it sounds like smart bidding has been a boost for SMCs.

[Dan Salmon, Lead Analyst - US Internet at New Street Research]

What what other ad products are you seeing get the most traction with that group? And any insights on your road map for, them from here would be great. Thanks.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Yeah. We're really excited about the progress with SMC segment. It's the largest contributor to ad revenue growth in Q2. And I think our improved go to market operations and the simplification of some of our ad products and ad manager have been really helpful there. You know, when it comes to the the smart, smart solutions for for advertisers, obviously, budget optimization, you know, has been in in testing and has and has driven some really strong, results.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

And then auto targeting as well, we're finding that AI can can really assist advertisers with finding the right audience to convert, you know, on their on their products and and lower funnel goals. So certainly excited about a lot of the the automation improvements there, and and that's especially important for smaller, you know, advertisers who may not necessarily have the resources to manage campaigns in such a fine grained way. So I think automation will will provide a big lift for SMCs, but but, you know, advertisers more more broadly as well.

[Operator]

Thank you. Our last question comes from Benjamin Black with Deutsche Bank. You may proceed.

[Benjamin Black, Co-Head Internet Equity Research at Deutsche Bank]

Great. Thanks for taking my question. I just have one on on Lens Plus, really. You know, it'd be great, Evan, if you could sort of talk a little bit about the reception. Maybe, you know, give us any sort of idea as to how conversion metrics or engagement trends are being or or sort of, you know, panning out in the early innings.

[Benjamin Black, Co-Head Internet Equity Research at Deutsche Bank]

You know, how big of an opportunity you think this could ultimately be? And and perhaps more broadly, you know, how do you think about the interplay between pricing and subscription to drive growth within Snapchat Plus? Thank you.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

Yeah. Thanks so much for the question. It's really early with Lens Plus, but we're super excited about it. Obviously, Lenses are really heavily engaged with on Snapchat with people, you know, using Lenses more than 8,000,000,000 times every day. So I do think the opportunity to offer exclusive Lenses and, of course, you know, our our AI Lenses, which have proven incredibly popular, will be, you know, a strong driver of growth with Lens Plus.

[Evan Spiegel, CEO, Co-Founder & Director at Snap]

So I think there's a nice top of funnel there for sure. But, you know, looking more broadly at pricing, we think there's room to experiment on pricing. I think our our primary focus so far has just been on continuing to build the value proposition for customers, you know, and we see, obviously, new features being a a a a major driver for new subscriber acquisition and retention as well. So, you know, it's it's a small but mighty team, and I think over time, especially given the size of the the revenue opportunity in front of us, we'll be investing more in, you know, pricing experiments. But but I'd say, you know, the primary focus for us is just continuing to build value for our subscribers and our community.

[Operator]

This concludes our question and answer session as well as Snap Inc. Second quarter twenty twenty five earnings conference call. Thank you for attending today's session. You may now disconnect.

Participants

Executives

• David Ometer, Head - IR & Capital Markets
• Evan Spiegel, CEO, Co-Founder & Director
• Derek Andersen, CFO

Analysts

• Ross Sandler, MD & Senior Internet Research Analyst at Barclays Capital
• Richard Greenfield, Partner, Media & Technology Analyst at LightShed Partners
• Mark Shmulik, MD & Senior Analyst - US Internet at AB Bernstein
• Mark Mahaney, Senior MD at Evercore ISI
• Justin post, Managing Director at Bank of America Merrill Lynch
• Eric Sheridan, Managing Director at Goldman Sachs
• Dan Salmon, Lead Analyst - US Internet at New Street Research
• Benjamin Black, Co-Head Internet Equity Research at Deutsche Bank