Snap narrows loss in Q1 2025, cites caution in ad spend amid economic concerns

Snap Inc. reported a 14% year-over-year revenue increase for Q1 2025, reaching $1.36 billion, up from $1.19 billion in Q1 2024. The company also saw a significant reduction in its net loss, which narrowed to $140 million, a 54% improvement compared to the $305 million loss in the same quarter last year.

Adjusted EBITDA more than doubled to $108 million, compared to $46 million in Q1 2024, and free cash flow surged by 202% to $114 million, up from $38 million. Operating cash flow also improved, rising to $152 million from $88 million.

Snap's user base continued to grow, reaching 460 million daily active users (DAUs), a 9% increase from the previous year, and 900 million monthly active users. The growth was driven by progress in direct-response advertising and the Snapchat+ subscription service, which saw a 75% year-over-year revenue increase, reaching $152 million.

Despite these positive results, Snap refrained from providing revenue guidance for Q2, citing macroeconomic uncertainty and advertiser caution due to changing economic conditions. The company expects DAUs to reach approximately 468 million in the next quarter and revised its full-year operating expense forecast to $2.65 billion to $2.7 billion. Snap also lowered its stock-based compensation guidance to $1.1 billion to $1.16 billion.

In after-hours trading, Snap's stock dropped by 12.5%, reflecting concerns about future growth and the lack of forward guidance. However, the company reported growth in its advertiser base, with direct-response ads accounting for a record 75% of ad revenue. Snap's continued focus on augmented reality and improved advertising products is seen as bolstering its competitive position.

Overall, Snap's Q1 results highlight solid growth in users and revenue, along with improved profitability. However, the company remains cautious about the near-term outlook due to ongoing economic headwinds and uncertainty in the digital advertising market.

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