(Reuters) – Snap beat Wall Street estimates for quarterly profit on Tuesday, benefiting from improvements to the Snapchat parent’s advertising platform.
Shares of the Santa Monica, California-based company rose more than 14% in extended trading.
The company has been making investments in artificial intelligence and machine learning tools in recent years to help in automated placement of ads, create personalized ads.
That has helped Snap tap small- and mid-sized advertisers, making them the largest contributor to the company’s ad revenue growth in 2024.
The company will roll out Sponsored Snaps, video ads that appear in users’ inboxes and Promoted Places, a feature that highlights business locations on Snap Map, to additional markets.
Snap has been focusing on direct response ads that are designed to prompt specific actions like app downloads or website visits, at a time when the company grapples with weakness in brand awareness ads in recent years.
It faces stiff competition from the likes of TikTok and Meta-owned Facebook and Instagram, which have become the go-to platforms for advertisers because of their larger user base.
The company said it would grow its fulltime headcount by 8% to 10% this year.
Snap reported adjusted earnings per share of 16 cents for the fourth quarter ended Dec. 31, beating analysts’ average estimate of 14 cents, according to data compiled by LSEG.
Daily active users of Snapchat increased 9% year-over-year to 453 million in the quarter, beating estimates of 450.8 million.
The company forecasts first-quarter revenue to be between $1.33 billion and $1.36 billion, the mid-point of which was slightly above analysts’ average estimate of $1.33 billion.
It expects adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $40 million to $75 million in the first quarter, below expectations of $78.1 million.
Revenue in the fourth quarter grew 14% year-over-year to $1.56 billion, marginally beating the average estimate of $1.55 billion.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel)
