Snap Inc. (NYSE:SNAP) closed Friday at $4.35, declining 1.4% for a third straight session. The stock has slipped approximately 4% from the prior Friday, while the Nasdaq Composite fell 2.1%. The continued weakness has intensified scrutiny ahead of the company's second-quarter earnings report, scheduled for release after the market close on August 3.
According to Snap's first-quarter financials, non-advertising revenue—classified as Other Revenue—contributed roughly 80% of the $166 million year-over-year sales increase. Advertising revenue accounted for the remaining 20%. Despite this, advertising still represented about 81% of total revenue, underscoring that growth is being propelled by a newer, smaller segment rather than the core business.
The Q1 2026 revenue breakdown shows advertising revenue of approximately $1.24 billion, up 3% year-over-year, and Other Revenue of $285 million, surging 87%. Total revenue reached $1.529 billion, a 12% increase. The strong performance in non-advertising revenue helps buffer Snap against fluctuations in the advertising cycle, but it also highlights that the headline growth rate was supported by minimal ad expansion.
For the second quarter, Snap projects revenue between $1.52 billion and $1.55 billion. The midpoint implies roughly 14% year-over-year growth but only 0.4% sequential growth. The company also expects adjusted EBITDA of $175 million to $200 million, along with restructuring charges of $95 million to $130 million, primarily in Q2. Snap aims to reduce annualized costs by over $500 million in the second half of the year.
CEO Evan Spiegel noted, "In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow." Global daily active users rose 5% to 483 million, though North American users declined. Revenue in North America grew just 2%, and average revenue per user was $3.17, below the $3.21 consensus estimate.
Ad delivery outpaced ad spend growth: impressions increased roughly 17%, but effective ad prices fell about 12%. Major North American advertisers continued to weigh on results. Mizuho analyst Lloyd Walmsley lowered his price target to $5 from $6, maintaining a Neutral rating, citing advertising struggles, user growth challenges, and uncertainty around Snap's Spectacles business. The $5 target implies a potential 15% upside from Friday's close, but Snap shares have dropped 46% year-to-date and 55% over the past 12 months.
Two key events next week could provide market context. Snap's annual meeting is set for July 30, and Reddit Inc. (NYSE:RDDT) will report Q2 results after the close that same day, offering a comparable perspective ahead of Snap's earnings. Additionally, Snap reached a settlement this week with a teenage plaintiff in a social media harm lawsuit; terms were not disclosed. Broader litigation at state and federal levels continues across the industry.
Risks remain concentrated: ad market declines, North American user losses, geopolitical instability in the Middle East, spending on Spectacles, and higher regulatory costs could offset gains from subscription services. The earnings assessment is clear: investors need faster advertising revenue growth while maintaining the cash-flow improvements that are driving Snap's recovery.
