Despite losing several million users, the stock price for Snap Inc., Snapchat’s parent company, is up 7 percent in after-hours trading after reporting strong Q2 revenue growth on Tuesday.
Snap posted a loss of 14 cents per share and revenue of $262 million for the three months ended June 30 — smaller than the loss of 17 cents per share Wall Street analysts had projected, and easily running past its $250 million sales estimates. Revenue increased 44 percent year-over-year.
Most problematic, however, was the direction Snapchat’s user base was trending. Snap reported it had 188 million daily active users — a decline of 3 million users since last quarter. It was the first time since Snap went public in early 2017 it has reported a decline in users. It also points to the app’s struggle to fend off its chief rival, Instagram, as it continues to copy many key Snapchat features.
Wall Street didn’t seem to mind, though, with shares jumping 7 percent in early after-hours trading.
Snap CEO and co-founder Evan Spiegel pointed to the app’s much-maligned redesign as a reason for its drop in users.
“It has been approximately six months since we broadly rolled out the redesign of our application, and we have been working hard to iterate and improve Snapchat based on the feedback from our community,” said Spiegel in his prepared remarks that accompanied earnings. “We feel that we have now addressed the biggest frustrations we’ve heard and are eager to make more progress on the tremendous opportunity we now have to show more of the right content to the right people.”
Snap also continued to bleed cash, losing $353 million during the second quarter.
The silver lining for Snap was Snapchat making more money off of the users it kept. The app pulled in $1.40 in average revenue per user — a 34 percent increase year-over-year — indicating the app is doing a better job of connecting advertisers to its users.
Spiegel also pointed to its stories from its publishing partners receiving more engagement, with a 15 percent increase in views year-over-year.
The company will hold a call to discuss its earnings at 5:00 p.m. ET.