Snap Inc.

Good afternoon, everyone, and welcome to Snap Inc's third quarter 2025 earnings conference call. At this time, participants are in a listen-only mode. I would now like to turn the call over to David Ometer, head of investor relations. You may proceed.

Thank you, and good afternoon, everyone. Welcome to Snap's third quarter 2025 earnings conference call. With us today are Evan Spiegel, chief executive officer and co-founder, and Derek Anderson, chief financial officer. Please refer to our investor relations website at investor.snap.com to find today's press release, earnings slides, and investor letter. This conference call includes forward looking statements which are based on our assumptions as of today. Actual results may differ materially from those expressed in these forward looking statements, and we make no obligation to update our disclosures. For more information about factors that may cause actual results to differ materially from these forward looking statements, please refer to the press release we issued today as well as risks described in our most recent Form 10-K or Form 10-Q, particularly in the section titled risk factors. Today's call will include both GAAP and non-GAAP measures. Reconciliations between the two can be found in today's press release. Please note that when we discuss all of our expense figures, they will exclude stock-based compensation and related payroll taxes, as well as depreciation and amortization and certain other items. Please refer to our filings with the SEC to understand how we calculate any of the metrics discussed on today's call. With that, I'd like to turn the call over to Evan.

Hi, everyone, and welcome to our call. In Q3, we made meaningful progress on our long-term strategy to grow our global community, deliver stronger performance for advertisers, and invest in the future of augmented reality. At the core of Snapchat is a mission that has endured since our founding. to reinvent the camera to strengthen human connection. Snapchat is built around real communication, helping people share moments and build closer relationships every day. This clarity of purpose continues to drive durable growth. Our community reached 477 million daily active users, an increase of 34 million or 8% year over year, and 943 million monthly active users, an increase of 60 million or 7% year over year. With this momentum, we have made further progress toward our goal of reaching 1 billion monthly active users around the world. Revenue increased 10% year over year to $1.51 billion, driven by improved advertising demand and the rapid expansion of our direct revenue streams. On the advertising front, continued growth in our small and medium-sized business customers and improvements in direct response advertising performance drove an acceleration in direct response advertising revenue, which increased 8% year over year and 13% quarter over quarter. Other revenue, which includes Snapchat Plus subscription revenue, increased 54% year-over-year to $190 million in Q3, reaching an annualized run rate of more than $750 million. To build on this momentum, we expanded our premium offerings, introduced new storage plans for memories, and launched AI-powered experiences in LensPlus and Platinum bundles that we believe will deliver incremental value to our most engaged community members. We remain disciplined in aligning our investments with our core strategic priorities while driving operating leverage over time. In Q3, we delivered $182 million of adjusted EBITDA and generated $93 million of free cash flow, while reducing our net loss by more than 30% year-over-year to $104 million, underscoring our progress towards sustained profitability. With approximately $3 billion in cash and marketable securities on hand, we are well positioned to continue investing confidently in innovation and long-term growth. We also continue to scale differentiated ad formats and offerings, such as sponsored snaps, promoted places, and the app power pack, supported by advances in AI for ranking, creative generation, and personalization. These investments are expected to compound performance over time, unlocking greater advertiser ROI and long-term revenue growth. At the same time, we are improving key components of our service to make Snapchat more reliable and as fast a launch as the native camera, an essential part of ensuring our service remains simple, accessible, and enduring. Snapping between friends and family remains the foundation of Snapchat, driving both daily engagement and long-term retention. In Q3, we shared that Snapchatters created over 1 trillion selfie snaps in 2024, demonstrating how deeply our community uses our camera to communicate and feel closer together. Over the next year, we are prioritizing sharing and conversations through new conversation starters, such as status updates, flashbacks, and topics, building new ways to play games with friends, and making it effortless to share spotlight videos through stories and chat. Our goal is to spark conversations, strengthen friendships, and inspire creativity. This quarter, we rolled out several new features that make communication faster, easier, and more expressive. Infinite retention allows users to save chats indefinitely, while Home Safe gives friends peace of mind with an automatic check-in after returning home. We also launched the Snapchat keyboard, extending our sticker library to other apps, and introduced Custom Moji, enabling users to generate personalized Bitmoji stickers from text prompts. These updates underscore our commitment to enhancing the Snapchat experience through retro visual communication, while fostering deeper community connections. Global time spent watching content and the number of content viewers increased year over year in Q3, reflecting our multi-year investment in machine learning and the continued strength of Spotlight. Building on this momentum, we launched our largest content recommendation model to date, improving freshness and relevance across the platform. We also upgraded our infrastructure to get a step closer to delivering content in near real time, reducing latency and cutting model training cycles from days to just two hours. As a result, the share of total spotlight views from content posted in the last 24 hours increased more than 300% year over year in the US, as our models now serve as more topical and original content. In addition, we launched our first unified user model that combines signals from Spotlight, Discover, and the camera. while advancing work on a trend detection model that identifies emerging creative trends and amplifies their reach. Snapchat is a platform where any creator can express themselves authentically, grow an audience, and build a business. Over the past year, we onboarded thousands of SnapStars, reaching a record level of active creators. We're also seeing established creators and homegrown talent thrive, such as Kaylee Rosie, a nursing student and plant enthusiast who has increased her followers by more than 50 times in the last six months, by posting stories and spotlight content nearly every day. To help creators succeed, we expanded monetization tools and new collaboration formats with brands, such as sponsored first snaps. This growing ecosystem has made Snapchat more resilient and diverse, driving a nearly 180% year-over-year increase in snap star spotlight posts in North America. More creator activity enhances the relevance and quality of our content inventory, strengthening the overall engagement flywheel for both users and advertisers. While we continue to innovate on our core product experience for our community, including efforts to address ongoing engagement headwinds, we are also navigating a number of evolving factors that we expect will influence community growth and engagement in the near term. The key focus of our current strategy is improving average revenue per user by more directly monetizing our core product. This includes the continued growth of Snapchat Plus, the introduction of sponsored snaps and promoted places, the launch of Lens Plus, and the testing of memory storage plans. These initiatives are designed to strengthen our top-line performance, but they do involve tradeoffs with engagement, so we expect some adverse impact on engagement metrics as these experiences are rolled out globally. At the same time, we are recalibrating our investments in community growth and the cost to serve our community in order to improve financial efficiency. This includes testing changes to our infrastructure that will lower costs in regions with less long-term monetization potential, allowing us to better align our resources with the financial opportunity of each geography, but potentially coming at the cost of adverse tradeoffs with engagement in these countries. We are also preparing for the upcoming rollout of platform-level age verification, which will use new signals provided by Apple and soon Google to help us better determine the age of our users and remove those we learn are under 13 or under 16 in certain geographies, such as Australia. These actions are an important step in maintaining a safe and compliant platform, though we expect they will also adversely affect engagement metrics as implementation progresses. In addition to these internal initiatives, we continue to experience the effects of regulation and government policy actions. Recent examples include Australia's social media minimum age bill, which takes effect in December, and government restrictions on access to internet services in certain countries. We anticipate that similar regulations in other jurisdictions may take effect or be passed in the near future. These policy developments, combined with potential platform-level age verification, are likely to have negative impacts on user engagement metrics that we cannot currently predict. While we remain committed to our goal of serving 1 billion global monthly active users, we expect overall DAU may decline in Q4, given these internal and external factors. And as noted above, we expect particularly negative impacts in certain jurisdictions. We believe these are the right actions to strengthen our business for the long term by improving monetization efficiency, ensuring compliance with evolving regulations, and positioning SNAP for sustainable growth. SNAP continues to be a global leader in augmented reality engagement and innovation. Every day, Snapchatters use AR lenses more than 8 billion times, and more than 350 million Snapchatters engage with AR experiences daily. Over 400,000 creators from nearly every country have built more than 4 million lenses using our AR tools, making Snapchat one of the most scaled AR platforms globally. In Q3, we introduced the Imagine Lens, our first open prompt image generation lens, allowing Snapchatters to create or reimagine snaps by simply typing a prompt. More than 500 million Snapchatters have engaged with GenAI-powered lenses over 6 billion times, reflecting the growing appeal of AI-driven creativity on our platform. Snapchatters engaged with our AI face swap lens over 1 billion times in Q3, illustrating how generative AI can turn self-expression into shared moments and open up new ways to spark conversations and connections. Our investment in generative AI is designed to make communication more expressive, personal, and human. Realistic style gen delivers lifelike fit, texture, lighting, and perspective, unlocking cinematic quality transformations and generating nearly 100 million lens views in Q3. Enhanced face gen enables higher fidelity face effects, generating over 700 million lens views, while selfie attachments use 3D asset generation to add realistic, context-aware elements like hats and hairstyles, generating over 145 million lens views. Coming soon, AI clips will allow creators to generate short, shareable videos from simple prompts, turning AI video creation into a social and collaborative experience. Together, these innovations demonstrate why our leadership in generative AI matters. They transform how people express themselves, create content, and share moments that strengthen their connections on Snapchat every day. We continue to see strong momentum with games. Over 180 million people now play games on Snapchat every month, with sharing up more than 100% year over year. To make these experiences more social, we introduced the games chat drawer, bringing games directly into chat so friends can play together seamlessly. Developers are using new tools in Lens Studio like the character controller, camera controller, input system, and Bitmoji Suite, which make it easier than ever to build personalized interactive experiences. New features like turn-based gameplay and enhanced leaderboards are driving innovation across popular titles, such as two-player mini golf and Bitmoji Tower Defense. To support creator monetization, we expanded the Lens Creator Rewards program with LensPlus payouts, enabling developers to earn based on engagement from LensPlus and Snapchat Platinum subscribers. Outside of Snapchat, Camera Kit reached over 68 million monthly active users by the end of Q3 and no longer requires mandatory Snapchat branding, making it a flexible, free SDK for brands and developers to deliver immersive AR experiences across apps, the web, and AR mirrors. Together, these updates reinforce our commitment to building the most expressive, scalable, and monetizable AR ecosystem in the world. Our long-term vision for AR extends far beyond the smartphone. For over a decade, we have been building towards the future where computing feels more natural, contextual, and integrated seamlessly into the world around us. After five generations of product development, SPEX will launch publicly next year, representing a major leap forward in human-centered computing. In Q3, we introduced SnapOS 2.0, our largest system update yet. It delivers faster performance and a redesigned browser optimized for streaming and productivity, adds full WebXR support, and includes a new UI kit and mobile kit to simplify interface and cross-device development. We also added features like travel mode, which keeps AR content stable while in transit, and iConnect, which enables instant shared experiences simply by looking at another person to co-locate content. Developers and brands are already building with Spectacles, including Enclue and Artglass, who are redefining live events with location-based lenses. These projects highlight the vast potential for creativity and commerce on specs. To help developers monetize these experiences, we introduced Commerce Kit, enabling developers to accept payments directly within lenses, unlocking digital goods and premium features in real time. Specs are purpose-built for the age of AR and AI, designed to make computing more personal, intuitive, and contextually aware. Unlike traditional devices centered around apps and files, specs understand the environment and adapt to user patterns over time. To support this next generation of computing, we introduced SnapCloud, powered by Supabase, a scalable backend platform that enables richer and more dynamic AR and AI experiences on SnapOS. SnapCloud is a key step in building the infrastructure that allows developers to create immersive, real-time applications and reflects our long-term commitment to advancing the AR ecosystem through specs. We believe Snap is uniquely positioned to win the next wave of AR computing. With Snap OS 2.0, Lens Studio, Snap Cloud, and our global developer ecosystem, we are at the forefront with an end-to-end AR stack spanning software, developer tools, and hardware. Together, these investments bring us closer to delivering the world's first fully standalone, human-centered AR glasses. We made significant progress across our advertising platform by focusing on three priorities, advancing our AI-driven ad performance, optimizing high-impact ad formats, and strengthening our go-to-market execution across SMBs and mid-market customers. Our investments in AI and machine learning are delivering measurable gains for advertisers. We advance dynamic product ads with large language models that better understand products, driving over four times higher conversion rates compared to baseline for certain campaigns. As a result of these and other improvements, purchase-related ad revenue grew 30% year-over-year, reflecting higher attribution accuracy and better campaign performance. For example, Comfort, a lifestyle and apparel e-commerce brand, leveraged target cost and max bid in their Snap campaign to scale faster and reached an incremental audience that delivered an 85% lift in site visits, a 79% increase in new customers, and a more than three times ROAS improvement as measured by WorkMagic since the start of their 2025 campaign. Sponsored snaps allow brands to join real-time conversations on Snapchat in a way that feels authentic and relevant to users. Early results show strong performance with up to 22% higher conversions and up to 19% lower cost per action when including sponsored snaps and advertiser campaigns. Advertisers across industries are using sponsored snaps to reach audiences where they are most active and engaged. For example, to strengthen share voice and drive user preference, ASICS partnered with Zeno Group to promote its latest running shoe collection through sponsored snaps, reaching 2 million unique Snapchatters in the chat inbox and driving a four-point lift in overall brand awareness and a 16-point lift among Snapchatters aged 35 and older, along with stronger return on advertising spend compared to existing media. In addition, eBay's sponsored snaps campaign to drive brand awareness was highly effective, achieving nearly two times incremental unique reach and positive lists in ad awareness and brand association. Sponsored snaps are also becoming increasingly direct response focused, delivering more personalized and contextually relevant experiences. According to a Kantar study, approximately 85% of U.S. Snapchatters say sponsored snaps feel relevant and fit naturally within their habits on the platform. Promoted Places compliments this offering by bridging digital engagement with real-world action. The format allows advertisers to highlight nearby store locations directly within the Snapchat map, unlocking new opportunities for performance-driven local marketing. Early testing shows double-digit lists and visitation, demonstrating its ability to influence real-world outcomes. For example, the fast casual chain Panda Express ran a promoted places campaign that resulted in a 15% incremental lift in visits as measured by our third party measurement partner in market. In addition, they saw a 10 point increase in brand favorability and a six point increase in action as measured by a brand list study. Together, sponsored snaps and promoted places demonstrate how snaps ad platform can influence the full marketing funnel from discovery and engagement to measurable real world results. while creating new opportunities for revenue growth across our global advertiser base. For app-based advertisers, we introduced the App Power Pack, a unified suite designed to improve performance across both scan and non-scan campaigns. Key features include target cost bidding, new app end cards that automatically incorporate App Store images, and playables for interactive game previews. Early results show that the App Power Pack is driving over 25% lift in iOS app installs. Early adopters are seeing strong returns, reinforcing Snapchat's role as a scalable performance channel for mobile marketers. For example, mobile gaming app Yota chose Snapchat to reach Gen Z through culturally relevant fast turnaround ads leveraging target cost bidding, delivering 35 times more iOS installs at 84% lower cost per install, 60 times more purchases at 90% lower cost per purchase, and six times more first-time purchases at 13% lower cost per ad to cart since implementing this new strategy. We continue to advance our automation capabilities through the Snap Smart Campaign Solutions suite. Smart targeting, which treats targeting inputs as suggestions and uses machine learning to identify incremental high-performing audiences, has launched, delivering an average 8.8% increase in conversions for adopted ad sets. Smart budget, our automated budgeting solution that optimizes overall campaign performance, has also rolled out across select advertiser objectives and bid strategies. Early results are encouraging with a 5% improvement in median cost per action and a 17% increase in median spend, and we plan to broaden availability early next year. In addition, we have begun testing SmartAd, which enables advertisers to upload raw creative assets and leverage Snap's ML systems to automatically drive performance. SMBs remained our largest contributor to ad revenue growth in Q3, driven by new advertiser onboarding, improved DR tools, streamlined go-to-market execution, and simplified workflows. We deepened partnerships with commerce platforms such as WooCommerce, making it easier for small and medium-sized businesses to advertise on Snap and reach incremental audiences efficiently. Looking ahead, we see significant potential in the medium customer segment. Our penetration remains low despite strong product market fit. We are realigning sales teams and agency partnerships to realize this opportunity, which we expect to become a meaningful growth lever through 2026. Direct revenue remains one of our fastest growing opportunities. In Q3, we expanded premium tiers such as Lens Plus and Platinum Bundles, introducing exclusive AR and AI experiences like the Imagine Lens. We are also planning to introduce live streaming and launch new tools to help creators build deeper relationships with their audience. In addition, we announced memory storage plans in Q3 and began rolling out this new offering to our community. More than 1 trillion memories already saved. These changes are designed to both enhance the user experience and sustain the infrastructure that supports long-term growth. We took an important step toward building out our AI platform by partnering with Perplexity AI to integrate its conversational search directly into Snapchat. Starting in early 2026, Perplexity will appear in our chat interface for Snapchatters around the world. Through this integration, Perplexity's AI-powered answer engine will let Snapchatters ask questions and get clear conversational answers drawn from verifiable sources all within Snapchat. Under the agreement, Perplexity will pay Snap $400 million over one year through a combination of cash and equity as we achieve global rollout. Revenue from the partnership is expected to begin contributing in 2026. This collaboration makes AI-powered discovery native to Snapchat, enhances personalization, and positions Snap as a leading distribution channel for intelligent agents laying the groundwork for a broader ecosystem of AI partners to reach our global community. Now I'd like to turn it over to Derek to share more about our financial progress.