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Snap shares and revenue exceed expectations with more users

(Reuters) – Snap shares up 23% on Tuesday after its revenue exceeds expectations based on more users and more people signing up to chat with friends and family on Snapchat app during the coronavirus pandemic.

The company said in a statement that daily active users is a metric widely monitored by investors and advertisers, rose 18% year-over-year to 249 million in the quarter ended September 30. Analysts expected it to reach about 244 million, according to ibis data from Refinitiv.

The company said it expects the number of users to keep growing to 257 million daily active users in the fourth quarter, exceeding analysts’ current estimates of 249.81 million

However, the revenue jump is a result of excess activity selling ads on the app. Revenue raised 52% to $679 million, broadly exceeding analysts’ estimates of $555.9 million.

Snap ranks itself as a safe platform for brands to advertise since it focuses on individual messages that disappear as soon as they’re read.

This growing reputation served Snap well in the third quarter coinciding with the boycott of more than 1,000 competitor advertisers to Facebook in July; In response to the issues of hate speech on the platform, as the popular short video app TikTok faced the possibility of a US ban due to national security concerns.

Speaking about earnings with analysts, Jeremy Gorman, Snap’s chief business officer, said we provided an opportunity for Snap as companies revised their advertising spending and helped contribute to revenue growth.

Debra Williamson, an analyst at research firm eMarketer, said Snap had “unique ad offerings, such as augmented reality ads” that helped it perform.

Speaking about the earnings, Snap CEO Evan Spiegel said the app was able to grow in users outside the US and Europe by partnering with local telecom providers and building features such as photo filters and locally relevant lenses.

Average revenue per user was $2.73, an estimated 28% increase over that achieved in the previous quarter.

Snap’s net loss decreased to $199.8 million, or 14 cents per share, from $227.37 million, or 16 cents per share, a year earlier.

Snap said revenue for the current quarter could grow 47% to 50% compared to the same period last year, but cautioned that the impact of the pandemic on holiday ads at the end of the year is unclear.

Snap’s stock made $35.00 higher after closing 0.7% lower at $28.45.

The shares of Facebook, Twitter and Pinterest also rose in after-hours trading.

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