Snap Inc. reported its quarterly financial results after the U.S. markets closed on April 29th, 2025 — and it wasn’t the report bulls were hoping for. Despite some encouraging user growth headlines, the underlying metrics left investors rattled, sending the stock tumbling more than 15% in after-hours trading.
As someone who has rated Snap as a “buy” throughout 2025, I’ll be candid — this report was frustrating. But short-term market reactions don’t always reflect long-term value. In this article, I’ll break down Snap’s Q1 results, explore what triggered the market’s sharp response, and share whether I view this drop as a buying opportunity or a red flag. I’ll also walk through my updated discounted cash flow (DCF) valuation, assess Snap’s relative value using forward earnings multiples, and compare Snap to other players in the social media landscape.
Revenue Growth and Operational Improvement
On the surface, Snap’s Q1 performance looked relatively strong:
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Revenue came in at $1.19 billion, up 14% year-over-year.
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Operating loss narrowed significantly to $194 million, down from $333 million in the same quarter last year.
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Cash flow from operations surged 72%, from $88.3 million to $151.6 million.
These improvements reflect a business becoming leaner and more efficient. Snap’s asset-light model — where user-generated content powers the platform without expensive content production costs — allows for potential margin expansion as monetization improves.
User growth was also solid:
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Daily active users (DAUs) increased by 38 million YoY to reach 460 million.
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For the first time, Snap disclosed monthly active users (MAUs), surpassing 900 million globally — a milestone that places it among the largest social platforms in the world.
A Strong Milestone: 900 Million MAUs — But the Headlines Don’t Tell the Full Story
Snap’s Q1 2025 results included a milestone that initially grabbed investor attention: the platform now boasts over 900 million monthly active users (MAUs) globally. This marks a significant jump from prior user metrics and stands out especially because Snap traditionally reports daily active users (DAUs), not MAUs.
For perspective, this MAU figure is nearly double that of Pinterest and puts Snap within striking distance of TikTok’s user scale. However, it’s still far behind Meta’s ecosystem, which includes Facebook’s 3 billion+ MAUs and Instagram’s 2 billion+.
While the headline is impressive, MAU growth doesn’t necessarily translate into monetization strength — and that’s where the cracks begin to show.
The Good: Solid Revenue Growth and Operational Improvements
Let’s start with the positives. Snap posted revenue of $1.19 billion, representing 14% year-over-year growth — a respectable rebound after several quarters of stagnation and volatility due to ad market softness.
More encouragingly, Snap significantly reduced its operating losses, which fell from $333 million in Q1 2024 to $194 million this quarter, a 42% improvement. The company also posted strong growth in operating cash flow, up 72% year-over-year from $88.3 million to $151.6 million. This is a reflection of Snap’s asset-light, content-efficient business model. Unlike traditional media companies, Snap doesn’t pay to produce content — it thrives off user-generated media, which it monetizes through advertising. That’s inherently a high-margin setup, and when it’s working, it works well.
The company also added 38 million new daily active users year-over-year, bringing DAUs to 460 million — another sign that Snap’s reach is growing, particularly in emerging markets.
So, where did things go wrong?
The Bad: North American User Decline — A Monetization Warning Sign
Buried on page 12 of Snap’s earnings press release is a detail that likely sparked the sharp negative market reaction. Snap’s most valuable user cohort — North American daily active users — fell from 100 million to 99 million.
This may seem like a small decline, but it’s a significant red flag. For the past five quarters, Snap’s North American DAUs had plateaued at 100 million. The first drop since 2021, especially in the company’s most profitable region, breaks that trend — and breaks investor confidence.
Why does it matter so much? Because monetization per user is wildly uneven across regions. Here’s the breakdown of average revenue per user (ARPU) by geography:
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North America: $8.41
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Europe: $2.26
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Rest of World: $1.17
In other words, a North American user generates 7x more revenue than someone in Asia, Latin America, or Africa. That means user growth in lower-ARPU regions can dilute overall monetization, and a decline in high-value users is a direct hit to revenue efficiency.
This decline was a warning shot, suggesting that competition (particularly from TikTok and Instagram) may be taking a toll on Snap's core audience in mature markets.
The Ugly: No Forward Guidance — A Confidence Crusher
The second issue that hammered investor sentiment was Snap’s decision to pull forward guidance for Q2 and the rest of 2025.
On the earnings call, management cited “macroeconomic uncertainty” as the reason. But in the market’s eyes, pulling guidance is rarely a sign of strength. It signals unpredictability, potential deterioration in performance, or internal lack of visibility — none of which inspire confidence.
This decision also has direct implications for valuation models. When companies increase uncertainty, investors raise their discount rates to compensate for risk, which lowers the present value of future cash flows. In practical terms, Snap’s equity risk premium just went up — not because of fundamentals, but because of opacity.
My DCF Valuation: Snap’s Intrinsic Value Remains Attractive
Despite the disappointing quarter, my discounted cash flow (DCF) model continues to show Snap as undervalued.
I project modest top-line growth in the mid-teens over the next five years, with gradual improvement in margins as Snap monetizes its global user base more effectively. I also factor in increasing competition, risk premium adjustments, and more conservative assumptions for user growth in high-ARPU regions.
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Discount rate (WACC): 10.5%
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Terminal growth rate: 2.5%
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Free cash flow growth (next 5 years): 13–15% CAGR
Based on these inputs, Snap’s fair value comes out to roughly $32 per share — more than 4x the current trading price of $7.76, as of May 1st, post-selloff.
Even if I run a more conservative DCF using a higher discount rate and flattening growth assumptions, I still get a fair value north of $20, suggesting significant upside from today’s levels.
Relative Valuation: Forward P/E Still Looks Cheap
From a multiple-based perspective, Snap looks inexpensive. According to data from Finchat.io, Snap trades at a forward P/E of just 23.8 — below its historical average and far below peers like Meta and Pinterest, both of which trade closer to 30–35x forward earnings.
Snap is being priced more like a legacy ad-tech company than a social media platform with nearly a billion monthly users. That creates an opportunity — if you believe Snap can reaccelerate monetization and stabilize North American usage.
Final Thoughts: Still a Buy — With a Short Leash
So, is Snap still a buy after this earnings disappointment?
In my view, yes — but with reservations. The long-term value proposition remains intact. The platform has scale, improving margins, and a unique user base that is still growing. The valuation is compelling, both on a DCF and relative basis.
But Snap has also tested investor patience for years. Management’s decision to withhold guidance adds a layer of risk, and the decline in North American users is not something to ignore. Personally, I continue to hold Snap — but it’s now a “show me” story. I need to see improved execution and renewed traction in its core markets to maintain long-term conviction.
While I continue to see upside potential, Pinterest remains my preferred pick in the space, offering stronger leadership, consistent monetization, and better risk-adjusted returns.
That said, for contrarian investors with a high risk tolerance, this dip in Snap may very well represent one of the more asymmetric buying opportunities in the market today.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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