Snap Swung to a Profit, but a Stalled Daily User Count Sent the Stock Down 10%

Snap returned to a quarterly profit as revenue rose 14%, but its daily user count barely grew and missed estimates, sending the shares down 10% after hours.

Snap reported revenue of $1.72 billion for the third quarter ended September 30, 2026, up 14% from a year earlier. That was just below the $1.73 billion analysts polled by FactSet expected, according to Barron's, and inside the company's own guidance range of $1.70 billion to $1.74 billion.

The bottom line swung. Net income was $56 million, against a net loss of $104 million a year earlier, and diluted earnings were 3 cents a share, above the roughly flat result Wall Street expected.

"In Q3, we generated positive net income as revenue grew 14% year-over-year to $1.72 billion, reflecting the progress we are making to build a more profitable business," Chief Executive Evan Spiegel said.

The audience stopped growing where it pays most

Daily active users - people who open Snapchat at least once a day - reached 495 million, up 4% from a year earlier. The count rose by only two million from the second quarter and missed the 498.5 million analysts expected, according to Barron's.

The stall is in Snap's richest markets. North America daily users fell 6% from a year earlier to 92 million, and Europe's slipped 1% to 98 million, while the rest of the world grew 9% to 305 million.

Each remaining North America user is worth more. Revenue per user there rose 20% to $11.07, against $3.48 worldwide, so the audience is shrinking where ads pay best even as monetization per person climbs.

Profit came from the cost line

Costs barely moved. Snap's total cost structure grew just 1% from a year earlier, the finance chief said, and headcount fell 13% to 4,540 full-time employees.

Adjusted EBITDA - a company-defined profit measure that excludes stock-based pay and depreciation - rose 110% to $383 million. That is a margin of 22% of revenue, and the company said about 93% of the quarter's incremental revenue flowed through to it.

Advertising still does the heavy lifting, and it slowed. Advertising revenue grew 4%: direct-response ads, which aim for an immediate purchase, grew strongly, but upper-funnel brand advertising declined from a year earlier, Chief Commercial Officer Ronan Harris said.

The growth came from subscriptions. Other revenue rose 84%, led by Snapchat+, Memories Storage and Lens+, and paid subscribers passed 30 million across the three services. Operating cash flow rose 44% to $210 million, and free cash flow rose 76% to $164 million.

The yardstick changes next year

Beginning with its first-quarter 2027 report, Snap will make monthly active users its primary audience measure, replacing the daily count. Monthly users reached 977 million in the third quarter, up 4% from a year earlier.

The change ends the regional daily figures altogether. Snap said it will discontinue regional daily users and regional revenue per user, and will judge monetization on monthly revenue per user instead.

"While DAU remains an important measure of engagement, we no longer believe it is the best primary measure of long-term value," the company said. "We do not intend to optimize Snapchat around daily use at the expense of long-term value for our community."

The timing is hard to miss: the daily measure is being retired in the same report where it missed estimates and stopped growing in North America. Snap's argument is that daily use has held steady as a share of monthly use, so the monthly count better reflects the community it can sell to advertisers.

The outlook asks for a strong holiday quarter

For the fourth quarter, Snap guided revenue to between $1.950 billion and $1.985 billion in its prepared remarks. The midpoint, about $1.97 billion, is a calculation from the range and sits just above the $1.96 billion Wall Street expected, according to Barron's.

It guided Adjusted EBITDA to between $490 million and $525 million, including planned spending on Specs, its augmented-reality glasses. It also trimmed expected full-year infrastructure costs to between $1.65 billion and $1.66 billion, from $1.65 billion to $1.70 billion.

A rising stock met the print

The shares had climbed 5.8% in Wednesday's regular session to close at $5.92, before the results, according to MarketCatalyst. Barron's noted the stock was already down 27% this year.

The reaction took the day's gain back, and more. In after-hours trading the shares fell about 10% to $5.33, in a snapshot published at 4:27 p.m. ET by MarketCatalyst. Investors were pricing the user stall, not the profit swing.

Snap ended the quarter with about $2.77 billion in cash, equivalents and marketable securities, up about $111 million from the end of June. Management said it expects to finish its current share-repurchase program in the fourth quarter, then manage dilution toward a stable fully diluted share count in 2027.

What remains unknown

The furnished documents do not split advertising and subscription revenue in dollars - only the growth rates - so the size of the subscription business awaits the quarterly report on Form 10-Q. Whether brand advertising recovers into the holiday quarter is also unproven; the guidance assumes a seasonally strong quarter without promising an advertising rebound.

Specs pricing and adoption are untested at scale: Barron's reports the glasses start at $2,195 for preorder. Management also flagged rising regulatory scrutiny of youth-related issues, with outcomes it called uncertain.

What to watch next

Watch the fourth-quarter print against the guide: revenue between $1.950 billion and $1.985 billion, and Adjusted EBITDA between $490 million and $525 million.

Watch the last daily-user report. The fourth quarter is the final print before monthly users take over, so its North America daily count is the last clean read on the stall.

Watch whether monthly users keep growing toward the one billion mark Snap cited, and what the new monthly revenue-per-user figure shows when it debuts in the first-quarter 2027 report.