Snap Inc.

Good afternoon, everyone, and welcome to Snap Inc.'s second quarter 2026 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.

Thank you, and good afternoon, everyone. Welcome to Snap's second quarter 2026 earnings conference call. With us today are Evan Spiegel, Chief Executive Officer and Co-Founder, and Doug Hott, 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 and earnings slides available on our IR website. 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. Snapchat is now one of the largest internet communities in the world, approaching 1 billion people using our service every month. Over the past few years, we worked intensely to rebuild our monetization platform and improve our go-to-market strategy, and those efforts are producing stronger results. Our objective now is to turn our scale into durable growth and stronger cash generation while demonstrating the long-term value of our investment in specs. We are approaching this work with a more focused AI-enabled operating model. AI is helping us improve our service faster, deepening engagement, and improving outcomes for advertisers. That supports revenue growth, margin expansion, and free cash flow. Free cash flow gives us the flexibility to continue investing in long-term opportunities, offset dilution, and strengthen our balance sheet. That is why free cash flow per share will be our primary financial objective going forward. 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. Last fall, I outlined three priorities for SNAP, strengthen our community and engagement, accelerate and diversify revenue growth, and build a more profitable cash generative core business. Q2 was a meaningful step forward across all three. Thank you for joining us. Gross margin reached 58%, net loss was $164 million, and operating cash flow was $176 million. Adjusted EBITDA was $250 million, and free cash flow was $121 million. At its core, Snapchat helps close friends and family stay connected. Over time, we have built Spotlight, SnapMap, and augmented reality around that foundation, giving our community more reasons to open Snapchat, discover something new, and share it with the people that they care about. Thank you for joining us. Thank you for joining us. Smart Campaign Solutions, our suite of AI-powered automation and optimization tools, is making it easier for advertisers to achieve better outcomes with less manual work. Those outcomes continue to improve. For app advertisers, cost per install declined 8% year over year, cost per purchase declined 18%, and app purchase volume increased 128%. Greater adoption by retailers also drove 43% growth in dynamic product ads revenue. Advertisers increased spending across native services such as sponsored snaps, where roughly one-third of the Snapchatters reached were incremental to other services on Snapchat. These results reflect the progress we are making across automation, optimization, measurement, and attribution. Our audience in the United States continues to broaden quarter over quarter, led by people aged 35 and older. Thank you for joining us. We have also built a meaningful second revenue stream. Snapchat Plus, Memory Storage, and Lens Plus help drive 85% year-over-year growth in other revenue to $316 million in Q2. Less than 3% of our monthly active users are paying subscribers, and we see substantial room to grow direct revenue over time through premium features, AI-powered creative tools, and additional subscription products. AI is transforming Snapchat and the way Snap operates. It powers better recommendations, more automated and performant advertising campaigns, and new creative tools for our community. Internally, it is helping our smaller, more focused team move faster and accomplish more. In Q2, code commits per engineer increased 75% year over year, while major reliability issues declined 57%. Our internal AI code reviewer now reviews 90% of pull requests across Snap and has saved an estimated 30,000 hours of code review time. Our AI-powered support agent answers approximately 3.9 million questions from Snapchatters each month and has reduced support ticket volume by approximately 62% since the start of the year. In advertising, AI increased first pass image review automation from 40% in Q2 2025 to nearly 90% in Q2 2026, resulting in faster approvals for advertisers, stronger content safety, and lower operating costs. Thank you. Unveiling specs in June was an important milestone after more than a decade of work. Specs are a new kind of computer built into see-through glasses, more capable than today's limited AI glasses, and more wearable than bulky VR headsets. Specs can understand the world around you and help with work, learning, entertainment, and shared experiences without pulling you away from the real world. We are excited to share much more about how specs work and what they can do at our launch event in Los Angeles on September 16th. Thank you, Evan. In Q2, revenue increased 19% year-over-year to $1.6 billion, including 9% growth in advertising revenue.