Shares of Snap Inc. (NYSE: SNAP) jumped 9% on Thursday, a day after the company released its third quarter 2025 earnings results. Revenues saw double-digit growth versus the prior year and came above expectations. The company’s string of losses continued but net loss in the just-reported quarter narrowed versus the year-ago period. Snap continues to see healthy user growth and engagement but the biggest highlight of its report was its partnership with Perplexity.
Higher revenues, narrower loss
Snap’s revenues increased 10% year-over-year to $1.51 billion in Q3 2025, beating estimates of $1.49 billion. Net loss narrowed to $104 million, or $0.06 per share, from $153 million, or $0.09 per share, in the prior-year period.
Top line growth in the quarter was driven by improved advertising demand and the expansion of direct revenue streams. Other Revenue, which includes Snapchat+ subscription revenue, was up 54% from last year.
User growth and engagement
In Q3, Snap’s global monthly active users (MAU) increased 7% YoY to 943 million. Daily active users (DAU) increased 8% YoY to 477 million. While DAUs dropped by 3% in North America, they rose by 1% in Europe and 15% in Rest of World.
Global time spent watching content and the number of content viewers both saw increases in the third quarter versus the previous year, reflecting the company’s investments in machine learning and continued gains from Spotlight.
Snap is witnessing changes in regulation and government policies aimed at making social media platforms safer for users, especially those underage. These policy changes could impact engagement metrics negatively. The Snapchat-owner believes these factors could lead to a decline in overall DAU in the fourth quarter of 2025.
Advertising
Snap’s advertising revenue grew 5% YoY to $1.32 billion in the third quarter, driven mainly by an 8% growth in direct response (DR) advertising revenue. DR ad revenues benefited from continued strength in the small and medium sized business (SMB) client segment.
The company saw strong double-digit growth in advertising revenues in Europe and Rest of World as opposed to North America where ad revenues inched up just 1% YoY in Q3. In North America, the SMB advertising business grew over 25% while the Large Client Solutions (LCS) business saw a slight decline. The North America LCS business continues to be a headwind to revenue growth.
Perplexity AI
Snap announced that it is partnering with Perplexity to integrate Perplexity’s AI-powered answer engine directly into Snapchat. Beginning in early 2026, Perplexity will appear in the Chat interface for Snapchatters worldwide, providing them with clear answers to their questions from verifiable sources.
As per the deal, Perplexity will pay Snap $400 million over one year, through a combination of cash and equity, as they achieve global rollout. The partnership is expected to begin contributing revenue in 2026.
Outlook
For the fourth quarter of 2025, revenue is expected to range between $1.68-1.71 billion, representing YoY growth of 8-10%.
The post Here are a few noteworthy points about Snap’s (SNAP) Q3 2025 performance first appeared on AlphaStreet.
