Snap beats revenue and user growth estimates and announces $500 million buyback

By Sheila Dang

(Reuters) – Snap (SNAP) beat Wall Street expectations for both quarterly revenue and user growth on Tuesday, as the parent company of messaging app Snapchat lured back some advertisers with more powerful advertising features.

A share repurchase program worth up to $500 million was also announced.

Snap shares initially fell 8% in after-hours trading before rising 10% to $12.

The Santa Monica, California-based company, which makes most of its revenue from selling digital advertising, has long battled larger rivals such as Facebook and Instagram owner Meta Platforms. To better compete, Snap invested in machine learning to improve ad targeting to users and also make it easier for small and medium-sized businesses to advertise on Snapchat.

Revenue rose 15% year over year to $1.37 billion in the third quarter ended Sept. 30, beating the average analyst estimate of $1.36 billion.

Snap said it expects revenue in the range of $1.51 billion to $1.56 billion for the current quarter. Wall Street was targeting the top end of the range, according to Refinitiv data.

The fourth quarter includes the holiday shopping season, a crucial time when brands spend heavily promoting their products and services. Advertising from major companies has historically helped boost Snap's business at the end of the year, but demand from those companies has been lower in recent months, Snap said in a letter to shareholders.

The number of daily active Snapchat users rose 9% year over year to 443 million, beating analyst estimates of 441 million.

(Reporting by Sheila Dang in Austin, Texas, Editing by Matthew Lewis)