Snap NYSE: SNAP reported second-quarter revenue growth of 19% as the company cited improving advertising performance, rapid expansion in subscription-related revenue and increased cash generation. The company also said it is shifting its primary financial objective toward free cash flow per share while continuing to invest in its Spectacles computing platform.
Revenue rose to $1.6 billion in the second quarter, while advertising revenue increased 9% to $1.28 billion. Other revenue climbed 85% to $316 million, driven by Snapchat+, Memories Storage and the Lens+ subscription offering. Monthly active users reached 971 million and daily active users totaled 493 million.
Chief Executive Officer and Co-Founder Evan Spiegel said Snapchat is approaching 1 billion monthly users and that the company’s work to rebuild its monetization platform and improve its go-to-market strategy is producing stronger results. He said Snap is focused on converting that scale into durable growth, margin expansion and cash generation.
Profitability and Cash Flow Improve
Snap reported a gross margin of 58%, up seven percentage points from a year earlier. Net loss improved by $99 million to $164 million, while adjusted EBITDA increased by $208 million year over year to $250 million.
Operating cash flow was $176 million and free cash flow was $121 million during the quarter. Over the past 12 months, Snap generated $919 million of operating cash flow and $706 million of free cash flow. Chief Financial Officer Doug Hott said the company has now produced positive free cash flow for eight straight quarters.
Hott said Snap’s adjusted cost structure increased 4% year over year, compared with 19% revenue growth, as operating efficiencies helped offset investments in long-term growth initiatives. He also said the company’s early-quarter restructuring is expected to have a greater effect on personnel costs beginning in the third quarter.
The company ended the quarter with approximately $2.7 billion in cash and marketable securities. Hott said Snap has repaid more than $2 billion of convertible notes due in 2027 and 2028, along with $47 million of notes due in August 2026.
Going forward, Hott said free cash flow per share will guide capital allocation decisions. The company aims to grow revenue faster than costs, invest in higher-return opportunities, maintain a healthy cash balance and use share repurchases to offset dilution. Following completion of its current repurchase authorization, which is expected in the fourth quarter, Snap plans to introduce a new multiyear dilution-management program beginning in 2027.
Advertising Momentum and AI Tools
Management attributed advertising progress to stronger results among large North American advertisers, continued small- and medium-sized business momentum and wider use of Smart Campaigns, Snap’s AI-powered automation and optimization tools.
Spiegel said app advertisers saw cost per install decline 8% year over year and cost per purchase fall 18%, while app purchase volume rose 128%. Dynamic product ads revenue increased 43%, supported by greater adoption from retailers. Hott added during the question-and-answer session that conversions across the platform rose 56% year over year, including app and pixel purchase goals.
Sponsored Snaps also contributed to advertiser adoption. Spiegel said roughly one-third of Snapchatters reached through Sponsored Snaps were incremental to other services on Snapchat.
Snap said World Cup-related advertising spending benefited second-quarter results. Hott said third-quarter guidance reflects the expected normalization of that spending as well as more difficult year-over-year comparisons after the advertising platform began stabilizing in late second-quarter 2025.
AI is also being used internally to improve productivity and lower costs, according to Spiegel. Code commits per engineer increased 75% year over year in the second quarter, while major reliability issues declined 57%. Snap’s internal AI code reviewer reviewed 90% of pull requests and saved an estimated 30,000 hours of code-review time, he said.
The company’s AI-powered support agent answers approximately 3.9 million questions from users each month and has reduced support-ticket volume by about 62% since the start of the year. In advertising, first-pass image-review automation increased from 40% in the second quarter of 2025 to nearly 90% in the latest quarter.
Subscriptions and Community Engagement
Snap said direct revenue remains a significant growth opportunity, with fewer than 3% of monthly active users currently paying for subscriptions. Spiegel said the company sees room to increase penetration through premium features, AI-powered creative tools and additional subscription products.
When asked about the longer-term opportunity, Spiegel said app-based subscription products across the industry generally appear to reach penetration rates of roughly 7% to 12%. He said continued product value additions and Lens+, which provides access to AI creative tools at a higher price point, could support subscriber growth.
The company also cited growing engagement with Spotlight. In the U.S., the number of people posting to Spotlight increased more than 115% year over year, while Spotlight daily active users grew more than 20%. Spiegel said Snap remains focused on improving activation, retention and engagement, particularly through core communication features, Spotlight, Snap Map and augmented reality.
North American daily active users stabilized sequentially at 92 million. Spiegel said Snap’s U.S. audience has broadened, particularly among users aged 35 and older, increasing the platform’s relevance to advertisers in automotive, healthcare, home goods, financial services, insurance and business-to-business categories.
Spectacles Investment and Third-Quarter Outlook
Snap is continuing to develop Spectacles, its see-through glasses platform designed to support AI-assisted computing in the real world. Spiegel said the company plans to provide more details at a Sept. 16 launch event in Los Angeles and expects to get the product into users’ hands later this year.
Spiegel said pre-launch interest has been strong, though he characterized Spectacles as a high-consideration purchase at $2,195. He said broad consumer adoption is likely to occur closer to the end of the decade, when factors such as product weight and cost improve.
Hott said planned investment in Specs is included in Snap’s existing operating-expense outlook and will be paced based on product, ecosystem and economic milestones. The company intends to preserve improving core profitability and cash generation while funding the initiative.
- Third-quarter revenue guidance: $1.70 billion to $1.74 billion.
- Third-quarter adjusted EBITDA guidance: $300 million to $350 million.
- Full-year infrastructure-cost outlook: $1.65 billion to $1.70 billion, up from prior guidance of $1.60 billion to $1.65 billion.
- Full-year adjusted operating-expense outlook: approximately $2.75 billion.
- Full-year stock-based compensation outlook: approximately $1.05 billion.
Hott said the higher infrastructure outlook primarily reflects potential additional investment in AI and machine-learning infrastructure to support revenue growth, particularly in direct-response advertising. He also said Snap expects direct revenue to continue growing materially faster than the overall business and anticipates sustained positive net income beginning in 2027.
The company noted that evolving legal and regulatory conditions, including youth-related scrutiny and several U.S. trials scheduled later this year, could materially affect its operations, costs, products, user growth and engagement.
About Snap (NYSE:SNAP)
Snap Inc is a camera and social media company best known for developing and operating Snapchat, a multimedia messaging application that allows users to send photos, videos and messages that disappear after being viewed. In addition to its core messaging service, Snap offers a suite of augmented reality (AR) tools, including custom Lenses and Filters, that enable users and third-party developers to create interactive and immersive experiences. The company also provides advertising solutions that allow brands to engage audiences through Snap Ads, Sponsored Lenses and Discover content on the platform.
Founded in 2011 by Evan Spiegel and Bobby Murphy, Snap has continually focused on innovation in camera technology and AR.
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