Snap Posts Profit and Passes 30 Million Paid Subscribers, but Shares Fall 12%

Revenue rose 14 per cent to $1.7225 billion from $1.5068 billion a year earlier, the company said in its earnings release. A year ago it lost $103.5 million. Adjusted EBITDA more than doubled to $382.6 million, and free cash flow rose to $164.5 million from $93.4 million.

The subscription milestone gives Snap a source of income that does not depend on advertisers. Chief executive Evan Spiegel told investors that the company had "surpassed 30 million paid subscribers across Snapchat+, Memories Storage, and Lens+". That is 5 million more than the 25 million Snap reported in February, TechCrunch noted. Spiegel credited "innovative AI-powered features" with helping Lens+ beat the company's expectations, and said paid subscribers are still a small share of the monthly user base.

The main Snapchat+ tier costs $3.99 a month. Lens+, which unlocks exclusive augmented-reality Lenses, costs $8.99, and the ad-free Snapchat+ Platinum costs $15.99. Snap also charges $1.99 a month for extra storage in its Memories feature, after limiting free storage last year.

Daily active users were 495 million, up 4 per cent from a year earlier but only 2 million more than in the second quarter. According to TechCrunch, analysts had expected 499 million. Monthly active users rose 4 per cent to 977 million, and average revenue per user rose 10 per cent to $3.48.

In its investor letter, Snap suggested it may pay less attention to daily users as a measure of progress. "Daily engagement has historically been stable as a percentage of monthly engagement, but we do not intend to optimize Snapchat around daily use at the expense of long-term value for our community," the company wrote. TechCrunch reported that Spiegel acknowledged advertising revenue growth remains below the company's target, and said Snap will focus on improving results for advertisers and adding more ways for businesses to reach users.

In the release, Spiegel said "AI is becoming a significant advantage for our teams and advertising platform". Snap's outlook for the fourth quarter is set out in its investor letter and on its earnings call, not in the release. Its next test is whether the AI-driven ad improvements it describes can close the gap with its own growth target in the holiday quarter.