🚨 SNAP Crashes After ARPU Miss — Is This the Beginning of a Bigger Problem?
Investors Panic as Snap’s Monetization Falls Short Despite User Growth
Snap Inc. (ticker SNAP, trades on the NYSE, sector: Social Media / Consumer Tech) just unveiled its second‑quarter earnings and the market reaction was swift and fierce. Revenue came in at $1.34 billion, reflecting an 8.7% year‑on‑year increase, yet investments and expectations had been seeking double‑digit gains. The company’s average revenue per user (ARPU) came in at $2.87, missing the projected $2.89, and that small shortfall slammed investor confidence hard. Shares plunged around 15–16% in after‑hours trading as sentiment shifted abruptly.
Daily active users (DAU) rose 9% year‑on‑year to 469 million, slightly ahead of forecasts near 467 million, but that increase wasn’t enough to offset weaker monetization. Snap blamed the ARPU miss partly on a temporary glitch in its advertising platform that caused some ads to run at unusually low prices—a technical error that cut into expected ad impressions and revenue. The glitch has since been resolved.
The broader context reveals a more complex picture. Snap is under mounting pressure from larger rivals like Meta Platforms (META) and TikTok, which continue to attract bigger ad budgets as marketing dollars narrow across platforms. Further, economic and regulatory headwinds played a role: the end of the U.S. de minimis duty‑free import exemption has squeezed ad spending by Chinese advertisers, and shifting budgets during Ramadan also contributed to the soft headline metrics.
Despite the ARPU setback, Snap did deliver some upbeat signals. Revenue growth, while the slowest in more than a year, remained solid and inline at 8.7%, matching consensus. Engagement improvements came through with the launch and roll‑out of Sponsored Snaps, a new video ad format appearing directly in users’ inboxes. Snap also saw Snapchat+ subscriptions rise 42% to nearly 16 million, diversifying revenue beyond traditional ad income.
Looking back at the first quarter of 2025, Snap had showed promise: revenue was up 14% to $1.36 billion, net loss narrowed 54% to $140 million, and adjusted EBITDA improved sharply, hitting $108 million. Daily active users reached 460 million then. But investors now appear worried that growth is decelerating—and further monetization gains may be slower than hoped.
Critics within Snap’s community are debating leadership and strategy. The ARPU miss has spurred questions about whether Snap’s monetization engine is robust enough. Some analysts assert that Snap’s vast user base—hundreds of millions globally—offers a long‑term opportunity, and that the share price dip presents a buying opportunity for patient investors banking on a recovery. Others are skeptical, pointing to high expenses in AI and platform investment and intensifying competition.
Looking ahead, Snap projects Q3 revenue between $1.48 billion and $1.51 billion, with adjusted EBITDA between $110 and $135 million—guidance that sits in line with analyst expectations. Still, net loss is expected to widen to $263 million, up from $249 million in the prior year, raising concerns around profitability timelines.
In a digital advertising landscape that grows fiercer by the quarter, Snap’s ARPU miss may serve as a wake‑up call: user growth alone isn’t enough. The platform’s ability to monetize effectively, innovate rapidly, and retain advertiser trust is now under sharp scrutiny. If Snap can stabilize ad performance, expand Snapchat+ uptake, and prove traction of new formats like Sponsored Snaps, it could weather the downturn. If not, further outperformance from rivals like META could leave it further behind.
