Key Morningstar Metrics for Snapchat
- Fair Value Estimate: USD 9
- Morningstar Rating: ★★★★
- Morningstar Economic Moat Rating: None
- Morningstar Uncertainty Rating: Very High
What We Thought of Snapchat’s Earnings
Snap SNAP reported fourth-quarter revenue of USD 1.72 billion, up 10% year over year, largely due to strength in average revenue per user. Adjusted EBITDA margin came in at 21%, up 300 basis points from the prior year, owing to growing operating leverage and a favorable sales mix.
Why it matters: Despite a 5% year-over-year decline in global daily active users, or DAUs, traction in high-margin offerings such as Snapchat+, Sponsored Snaps, and Memories Storage Plans improved core platform monetization, supporting both top-line and profitability expansion.
- Monetization metrics improved due to better user and advertiser engagement. Sponsored Snaps drove active advertiser growth of 28% year over year. On the user front, paid offerings like Snapchat+ remained a bright spot, and should support 3%-4% annual ARPU growth over the next few years.
- Despite the solid performance, Snap continues to lag heavyweights like Meta, which recently reported 25% annual growth in ad sales. We expect competition to remain high and forecast roughly 10% annual sales growth for Snap in the next five years, which lags the broader industry’s midteens growth.
The bottom line: We maintain our USD 9 fair value estimate for no-moat Snap. Our model adjustments reflect higher innovation expenses due to the upcoming Specs launch, offset by higher gross margin expectations. Shares were up 3% after hours to about USD 6 and appear materially undervalued.
Coming up: Management expects first-quarter 2026 revenue to be USD 1.52 billion at the midpoint alongside adjusted EBITDA margin of roughly 12%. We view these targets as achievable and model upside to both.
Key stats: North America DAUs declined to 94 million from 100 million in the prior-year period due to reduced community marketing investments. International user-base growth came in below expectations, as a new platform-level age-verification law in Australia led to the removal of 400,000 accounts.
