Snap falls short on third-quarter revenue but turns a profit

Sales rose 14% to $1.72B, above the $1.7B Snap guided in August but below the $1.77B expected.

Snap's third-quarter revenue grew 14% from a year earlier to $1.72B, short of the $1.77B expected. Earnings came in at $0.03 a share on a GAAP basis, and net income turned positive.

Against the market, the quarter is a miss. Against Snap's own forecast, it is a beat. In August the company guided third-quarter revenue of $1.7B and earnings of $0.00 a share. The $1.77B expected sat above what Snap itself had guided, which suggests the market was asking for more than management had promised.

The profit is the better news. Snap lost $0.10 a share in the second quarter, when revenue of $1.60B beat the $1.54B expected. Evan Spiegel, co-founder and chief executive, said the turn to profit reflects progress toward a more profitable business. But $0.03 a share is a thin margin.

Snap has called SPECS, its augmented reality glasses, its largest long-term opportunity, and said in August that free cash flow per share was its primary financial objective. On September 16, at a launch event in Los Angeles, it announced Specs Intelligence, an anticipatory AI service across iPhone, Mac and Specs AR glasses.

Spiegel says AI is strengthening Snap's advertising platform even as the company invests in augmented reality. That puts new spending on top of a business that has only just turned a profit, so the case for it rests on the platform paying off later.