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Snap’s stock soars 28% after the company reveals an unexpected profit.

Snap shares surged 28% on Friday after the company surprised Wall Street by showing a profit and reported sales and user numbers that exceeded analysts’ estimates.

User growth was also better than expected, with Snap reporting 422 million daily active users (DAUs) in the first quarter, up 10% year over year, surpassing the average analyst estimate of 420 million.

Revenue in the first quarter increased 21% to $1.19 billion from $989 million a year earlier, exceeding analysts’ estimates for sales of $1.12 billion. Snap reported adjusted earnings per share of 3 cents, while analysts were expecting a 5-cent loss. Adjusted EBITDA was $46 million, compared to expectations for a loss of $68 million.

Advertising revenue came in at $1.11 billion in the first quarter, with Snap’s “Other Revenue” category, driven by Snapchat+ subscribers, reaching $87 million – a 194% year-over-year increase. Snap reported more than 9 million Snapchat+ subscribers for the period.

Snap has been working on rebuilding its advertising business, with investments starting to pay off. Advertising revenue growth was primarily driven by improvements in the advertising platform and demand for direct-response advertising solutions.

Despite the positive results, Snap’s growth, its fastest since March 2022, fell short of Meta, which reported 27% growth in its first-quarter results. Meta shares still plunged after a light forecast and talks of long-term investments.

In February, Snap announced a workforce reduction of 10%, around 500 employees. However, the company stated that headcount and personnel costs will “grow modestly” throughout the year.

For the second quarter, Snap expects revenue between $1.23 billion and $1.26 billion, surpassing the $1.22 billion expected by analysts.

A view of the atmosphere during the Snap Partner Summit 2023 at Barker Hangar on April 19, 2023 in Santa Monica, California.

Joe Scarnici | Getty Images Entertainment | Getty Images

“I think more broadly, we saw a much more robust brand environment, which played out in all of our regions in Q1,” CFO Derek Andersen said on the earnings call.

Adjusted EBITDA “exceeded our expectations” and was primarily driven by operating expense discipline and accelerating revenue growth, according to Snap.

Meta reported better-than-expected first-quarter results but still experienced a drop in shares after a light forecast and discussions about long-term investments.

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