Snap turns the corner with record cash haul as AI, subscriptions and Specs fuel growth

For years, Snap was the social platform that investors believed always had potential. This quarter, it finally started looking like a company cashing in on it.

The Snapchat parent has reported A$2.3 billion in second-quarter revenue, up 19% year-on-year, while delivering the strongest free cash flow in its history as advertising improved, subscription revenue surged, and the company doubled down on its long-term augmented reality ambitions.

Snap narrowed its quarterly net loss by 38% to A$235 million, while Adjusted EBITDA climbed to A$359 million, up from A$59 million a year earlier. Free cash flow soared 407% to a record A$174 million.

The result marks Snap's eighth consecutive quarter of positive free cash flow, suggesting the company is becoming less reliant on advertising alone.

Advertising remains core as subscriptions accelerate

Daily Active Users climbed 5% year-on-year to 493 million, while Monthly Active Users reached 971 million.

Advertising revenue increased 9% to approximately A$1.84 billion, but the standout performer was Other Revenue, which includes Snapchat+, Memories Storage and Lens+. That business grew 85% year-on-year to approximately A$453 million, highlighting Snap's success in building recurring revenue streams beyond advertising.

Gross margin expanded seven percentage points to 58%.

Europe delivered the strongest regional growth, with revenue rising 33% to approximately A$507 million. North America remained Snap's largest market, generating approximately A$1.35 billion in revenue, up 15%, while Rest of World revenue increased 17% to around A$434 million.

The quarter included approximately A$184 million in restructuring charges, which were excluded from Adjusted EBITDA. Full-time headcount declined 9% year-on-year to 4,723 employees.

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AI and advertisers drive momentum

Co-founder and CEO Evan Spiegel said the company had continued improving both financial performance and advertiser outcomes.

"We grew revenue by 19%, expanded margins, and generated positive free cash flow while improving advertising performance and rapidly growing our direct revenue business.

"We remain focused on serving our 971 million monthly active users, delivering measurable value for advertisers, and investing with discipline to increase free cash flow per share over time."

Chief financial officer Doug Hott said the quarter had been driven by stronger relationships with advertisers and growing adoption of Snap's AI products.

"The quarter reflected progress with large advertisers in North America, broader adoption of our AI-powered Smart Campaign Solutions, continued SMB momentum, and 85% growth in Other Revenue."

Specs remains Snap's long game

Spiegel also reiterated that Specs, Snap's upcoming augmented reality glasses, remains the company's biggest long-term bet.

He described Specs as the company's "largest long-term opportunity," with a commercial launch event scheduled for 16 September in Los Angeles. Snap said investment in the device remains within its existing operating expense guidance.

Looking ahead, the company expects third-quarter revenue of between approximately A$2.44 billion and A$2.50 billion, alongside Adjusted EBITDA of between approximately A$430 million and A$502 million.

Snap also lifted its full-year infrastructure cost guidance to between approximately A$2.37 billion and A$2.44 billion, citing additional investment in AI and machine learning infrastructure. It also plans to launch a new multi-year share buyback program during the fourth quarter.