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Snap (SNAP) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Aug 3, 2026

Source: earnings call transcript

Executive summary

Snap Inc. Q2 FY26 — Strong Revenue Growth and Improved Profitability Driven by Ad Platform and AI Efficiencies

Snap Inc. delivered a strong second quarter, showcasing the benefits of its rebuilt monetization platform and AI-enabled operating model. The company achieved robust revenue growth and significant improvements in profitability and free cash flow, which is now its primary financial objective. Management is focused on leveraging this momentum to invest in long-term opportunities like Specs while maintaining disciplined cost growth and managing share dilution.

Highlights

5

  • Revenue increased 19% year-over-year to $1.6 billion, exceeding expectations.

  • Adjusted EBITDA grew by $208 million year-over-year to $250 million, reflecting significant operating leverage.

  • Free cash flow reached $121 million in Q2 and $706 million over the past 12 months, marking eight consecutive quarters of positive FCF.

  • Other revenue, primarily from Snapchat+ and Lens+, surged 85% year-over-year to $316 million.

  • AI-powered Smart Campaign Solutions drove an 8% decline in cost per install and an 18% decline in cost per purchase for app advertisers.

Concerns

3

  • Full year infrastructure cost guidance was raised to $1.65 billion-$1.70 billion from $1.60 billion-$1.65 billion due to increased AI/ML investments.

  • Q3 revenue guidance of $1.70 billion-$1.74 billion implies a deceleration from Q2's 19% growth, partly due to the normalization of World Cup spending.

  • The company continues to monitor evolving legal and regulatory landscape, which may result in significant changes to products, increased compliance, and legal costs.

Guidance & targets

CategoryTargetConfidence
Q3 Revenue
$1.70 billion to $1.74 billion
high materiality
High
Full Year Infrastructure Costs
$1.65 billion to $1.70 billion
medium materiality
High
Full Year Other Cost of Revenue (excluding infrastructure)
16% to 17% of revenue
low materiality
High
Full Year Adjusted Operating Expenses
approximately $2.75 billion
medium materiality
High
Full Year Stock-Based Compensation
approximately $1.05 billion
low materiality
High
Q3 Adjusted EBITDA
$300 million and $350 million
high materiality
High
Net Income
positive
high materiality
Medium
Fully Diluted Share Count
stable
medium materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Advertising Revenue
Growth driven by progress with large advertisers in North America, broader adoption of AI-powered smart campaign solutions, and continued SMB momentum.
$1.28 billion9%——
Other Revenue
Primarily driven by Snapchat+, Memory Storage, and Lens+ subscriptions. Represents a meaningful second revenue stream.
$316 million85%——

Product announcements

ProductTypeDetails
Specsmilestone

Risks & headwinds

Regulatory and legal landscape Later this year and beyond

Outcomes remain uncertain, may result in significant changes to 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.

Mitigation:Closely monitoring the regulatory environment, including age assurance, privacy, and online safety requirements.

World Cup spending normalization Q3 FY26

Q3 revenue guidance reflects expected normalization of World Cup-related spending.

Mitigation:Focusing on continued constructive trends across the platform, including large advertiser momentum, SMB strength, and broader adoption of smart campaign solutions.

Specs mass market adoption challenges Long-term (end of decade)

High consideration purchase at $2,195. Mass market consumer adoption expected towards the end of the decade.

Mitigation:Focusing on product quality, customer experience, and ecosystem development; expecting weight and costs to come down over time.

What to watch in Q3 FY26

Q3 Revenue Performance

next quarter
Current $1.6 billion (Q2 actual)
Target Within $1.70 billion to $1.74 billion guidance range

Why it matters

Verifies the company's ability to sustain top-line growth amidst normalizing World Cup spending and tougher year-over-year comparisons.

Our guidance range for Q3 revenue is $1.70 billion to $1.74 billion.

Find out whether SNAP delivers this. Inve re-checks your case every morning.

Q&A highlights

What gives management confidence that the strong Q2 growth is sustainable?

Evan Spiegel highlighted broad improvements across the advertising platform and go-to-market execution, including stronger performance for lower-funnel advertisers, easier campaign management through automation, and a 56% YoY increase in conversions across the platform. He noted increased spending from existing advertisers and broader adoption of new formats as evidence of stronger fundamentals.

“One of the things I'm particularly excited about is that all these improvements resulted in a 56% year-over-year increase in conversions across the platform, including app and pixel purchase goals.”

asked by Douglas Anmuth · answered by Evan Spiegel

2 min read 5 chapters

Detailed narrative

Monetization Platform and Go-to-Market Progress

Snap's Q2 performance reflects significant progress in rebuilding its monetization platform and improving go-to-market strategies. The company observed stronger results with large advertisers in North America and continued strength among small- and medium-sized businesses. These improvements led to a 56% year-over-year increase in conversions across the platform, including app and pixel purchase goals, and increased spending from existing advertisers.

AI-Powered Operating Model and Efficiency Gains

AI is transforming Snap's operations, leading to improved service, deeper engagement, and better advertiser outcomes. Internally, AI has driven a 75% year-over-year increase in code commits per engineer and a 57% decline in major reliability issues. The internal AI code reviewer now handles 90% of pull requests, saving an estimated 30,000 hours. An AI-powered support agent answers 3.9 million questions monthly, reducing support ticket volume by 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.

Specs and the Future of Computing

Snap is investing in Specs, a new type of computer built into see-through glasses, designed for a future where AI assists users without constant screen interaction. The company views this as an enormous long-term opportunity, despite the technical challenges and high price point of $2,195. A launch event on September 16 will provide more details, with mass market consumer adoption expected towards the end of the decade as weight and costs decrease.

Diversification of Revenue Streams

Beyond advertising, Snap is building a meaningful second revenue stream, with 'other revenue' growing 85% year-over-year to $316 million. This growth is primarily driven by Snapchat+, Memory Storage, and Lens+. With less than 3% of monthly active users currently paying subscribers, management sees substantial room for growth through premium features, AI-powered creative tools, and additional subscription products.

Financial Objectives and Capital Allocation

Snap's primary financial objective going forward is free cash flow per share, connecting operating performance, disciplined capital allocation, and long-term shareholder value. The company aims to grow revenue faster than costs, invest with discipline, and use its share repurchase program to offset dilution. A new multiyear dilution management program is planned for 2027, funded primarily through free cash flow, to support a stable fully diluted share count.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.