Snapchat's advertising business bounced back from the effects of Apple's privacy changes, with shares rising by 50%.
Snap Inc on Thursday said its advertising business bounced back from the effects of Apple Inc's privacy changes faster than it expected, and shares of the company skyrocketed 50% as it provided a first quarter outlook that surpassed analyst estimates.
The results were good news for a tech sector hammered since yesterday on gloomy outlooks and concern that Apple's privacy updates, which were introduced last year and allow users to prevent apps from tracking their online activity for advertising purposes, would hurt ad revenue.
Snap forecast first-quarter revenue between $1.03 billion to $1.08 billion, and daily active users to be between 328 million to 330 million. The guidance for both metrics surpassed analyst estimates, according to IBES data from Refinitiv.
Digital pinboard company Pinterest Inc also reported higher-than-expected revenue on Thursday and its shares rose 20%
The earnings reports from both Snap and Pinterest contrast with that of Facebook owner Meta Platforms Inc, whose sharesfell 26% on Thursday in what could be the largest single-day wipeout in market value for a U.S. company, a day after it said the impact from Apple's privacy changes could be "in the order of $10 billion" this year.
Meta said the Apple updates hurt advertisers' ability to target ads to potential customers and measure the effectiveness of ads.
A large portion of Snap's advertisers began using new ad measurement tools by the end of the fourth quarter, and parts of Snap's advertising business began to recover from the Apple changes "quicker than we anticipated," said Snap Chief Financial Officer Derek Andersen, in prepared remarks released ahead of the earnings call with analysts.
However, global supply chain disruptions and labor shortages hurt advertising demand from consumer packaged goods and restaurant brands, he added
Snap's revenue for the fourth quarter ended Dec. 31 was $1.3 billion, an increase of 42% from the prior-year quarter. The figure beat analyst expectations of $1.2 billion, according to IBES data from Refinitiv.
Daily active users on Snapchat rose 20% year-over-year to 319 million, beating consensus estimates of 316.5 million.
Snap still has a long runway for growth compared to larger tech rivals. It has developed a strategy to attract new users across Latin America, Europe and Asia. Meta reported Wednesday that Facebook has 2.91 billion monthly users globally, which showed no growth compared with the previous quarter.
Snap also reported its first quarter of positive net income since its initial public offering, with earnings of $22.5 million in the fourth quarter, compared with a net loss of $113 million in the prior-year quarter
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