Shares of Snap were up 12 percent after hours Monday as the social media platform beat second-quarter revenue expectations.
Revenue increased 19 percent year-over-year to $1.60 billion, as monthly active users grew to 971 million, up from 956 million in the prior quarter, and daily active users reached 493 million, up from 483 million in the prior quarter. The company reported a net loss of $164 million, after a net loss of $263 million in the prior year, as part of its renewed focus to reach profitability.
But beyond the current revenue growth that’s being seen around the app, and the company’s new “more focused, AI-enabled operating model,” CEO Evan Spiegel outlined that he sees the company’s future in its newest version of wearable technology.
“Our largest long-term opportunity is SPECS, a new kind of computer built into see-through glasses. SPECS are designed for a future in which AI does more work on our behalf and people spend less time operating screens. I believe we can pursue that future from a much stronger position by continuing to improve our core business and remaining disciplined about how we invest,” Spiegel said in the press release.
Snap announced the new wearable glasses in June, setting up pre-orders of the $2,195 glasses with expected shipment this fall in the United States, United Kingdom and France. The glasses were described as a mix of other AI glasses and VR headsets, offering tech such as directions, AI assistance, the ability to stream content and overlay interactive lessons onto surfaces. The glasses don’t officially launch until Sept. 16.Asked on the earnings call how pre-orders are going so far, Spiegel admitted that many consumers want to try the tech before committing.
“What we’re hearing from folks is really that they want to try SPECS. It’s obviously a high consideration purchase, you know, at $2,195, and and obviously developers and folks who are familiar with the platform really understand it and understand the technical leap we’ve made with with this generation, I think for the broader public and consumers, it’s going to be really important for folks to go hands-on. I think September 16th, our upcoming launch event, will be an important you know sort of starting point for that consumer-oriented journey,” Spiegel said on the earnings call.
Snap has attempted glasses in the past and has not seen big returns. The company launched Spectacles, camera-equipped sunglasses that recorded short videos, in 2016. These were not big sellers and caused the company, in 2017, to report losses due to excess orders. The company later released updated versions of the glasses and then new AR glasses in 2021.Asked what gives Spiegel the confidence to compete against Apple and other big companies who are developer similar products, Spiegel said the company has “first-mover” advantage.
“What is very clear to us is that the long-term opportunity to develop the next computing platform is absolutely enormous. If you look at what laptops and desktops did to desk jobs, the transformations in productivity and what that enabled for the world over the last couple decades has just been extraordinary. And I think what’s so unique about SPECS is that they bring computing to the real world and to real-world jobs and allow you to work hands-free,” Spiegel said.
The company said the investment in SPECS is included in its full-year adjusted operating expense outlook, which remains $2.75 billion. Snap’s guidance range for Q3 revenue is $1.70 billion to $1.74 billion, and the company also expect infrastructure costs to grow modestly with full-year costs of $1.65 billion to $1.70 billion due to continued investments in the company’s AI-enabled operating model.
All of this comes after the company laid off 1,000 employees, including 16 percent of full-time employees, were laid off at the company in April. The company said the layoffs would reduce the company’s annualized cost base by more than $500 million by the second half of 2026, which would help the company get closer to profitability.
“Last fall, I described Snap as facing a crucible moment, requiring a new way of working that is faster and more efficient, while pivoting towards profitable growth. Over the past several months, we have carefully reviewed the work required to best serve our community and partners and made tough choices to prioritize the investments we believe are most likely to create long-term value,” Spiegel said at the time.
One possible obstacle for the business moving forward, as the company noted, is a number of trials as well as “regulatory scrutiny” related to the use of the app by younger generations.
“We continue to monitor the evolving legal and regulatory landscape in the United States and internationally that could materially impact our business and financial results, including increased regulatory scrutiny on youth-related issues and several trials scheduled in the United States later this year. While outcomes remain uncertain, they may result in significant changes to our products and business practices, increased compliance requirements and legal costs, increased payments for legal judgments and settlements, and negative impacts to user growth and engagement,” CFO Doug Hott said.