Key Points
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Snapchat continues to lose money. It hinted at positive net income in 2027, but user base trends suggest that it will be temporary.
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The company is losing daily average users in the U.S. and Europe. All of its growth is coming from international regions where the ARPU rates are much lower.
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Meta Platforms continues to grow much faster than Snapchat despite having far more market share, and the former’s AI investments might give the latter fewer opportunities to catch up.
Growth-oriented investors often tolerate short‑term losses in exchange for strong revenue expansion, provided that the losses narrow over time. This dynamic suggests that a company can eventually turn profitable. Yet when a firm stays unprofitable for an extended period—say, 15 years—it may be prudent to remain on the sidelines. Snapchat (NYSE: SNAP) fits that profile: despite boasting 971 million monthly active users (MAUs), the company continues to post losses, and its shares have fallen more than 30% year‑to‑date.
Image source: Getty Images.
Margins Have Improved, but the Prolonged Losses Remain a Concern
Snapchat’s second‑quarter results showed 19% year‑over‑year revenue growth and a narrowing loss, a mix that would normally appeal to growth investors. However, after 15 years of persistent losses, shareholders have good reason to be impatient. Net loss for the quarter totaled $164 million on revenue of $1.6 billion, translating to a negative net margin of roughly 10%. The company is also expanding more slowly than Meta Platforms (NASDAQ: META), which posted 28% year‑over‑year revenue growth in the same period.
Looking ahead, management expects adjusted EBITDA of $300 million to $350 million in the third quarter—an improvement from the $250 million adjusted EBITDA recorded in Q2—but that metric still does not equate to positive net income. Leadership projects net income will turn positive in 2027, although a multi‑year dilution‑management program launching that year could offset some of those gains. Notably, Snapchat has kept operating costs in check while many peers ramp up AI‑related spending, a cautious approach that may limit future opportunities but reflects prudent stewardship given its current financial position.
User Activity Is Declining in Key Markets
Snapchat’s 971 million monthly active users represent both a strength and a limitation. While the massive audience offers a solid foundation for revenue expansion, it also means the platform has limited room to significantly boost its user base. Year‑over‑year MAU growth stands at 4%, and the rate of new user acquisition is slowing: the company added 19 million MAUs from Q1 2025 to Q2 2025, but only 15 million in the comparable 2026 quarters.
This overall growth masks a troubling decline in Snapchat’s core markets. Daily active users (DAUs) in North America have fallen 6% year‑over‑year, with consecutive quarterly drops, while European DAUs are down 2% year‑over‑year and have remained flat for several quarters. The United States contributed 59% of Q2 revenue, and Europe accounted for 22%, underscoring the importance of these regions. Although DAUs in other regions continue to climb, average revenue per user (ARPU) there is just $1, far below the $10.26 ARPU in the United States.
If these trends persist, the anticipated profitability in 2027 could prove short‑lived.
