Snap Inc. shares edged modestly higher in early trading Tuesday, following an upgrade from Rothschild Redburn that boosted the stock to Buy and doubled its price target to $10 from $5. The upgrade comes just ahead of the company's first-quarter earnings report, scheduled for May 6, which will serve as a critical test of whether cost-cutting measures and subscription growth can translate into improved profitability.
Shares of the Snapchat parent traded at $6.09, up 0.4%, after a sharp rally in the previous session. The upgrade from Redburn analysts Joseph Barker and James Cordwell reflects optimism that Snap is better positioned than other small social media peers to diversify revenue and control costs. The analysts noted that AI is driving a bifurcation in online advertising, with Meta Platforms widening its lead, but they see Snap as a standout in the space.
Cost-Cutting Plan Targets 0 Million in Annual Savings
Snap's latest restructuring plan, announced on April 15, involves cutting approximately 1,000 jobs, or 16% of its full-time workforce, and eliminating over 300 open positions. CEO Evan Spiegel informed staff that the reductions are expected to reduce the company's annualized cost base by more than $500 million by the latter half of 2026, paving what he described as "a clearer path to net-income profitability."
The layoffs are expected to result in severance and related charges of between $95 million and $130 million, according to a regulatory filing. As of the end of 2025, Snap employed 5,261 full-time workers.
Subscription Growth and Ad Improvements Drive Revenue
Snap is increasingly focusing on subscription services and refining its advertising offerings while pulling back on expenses. For the full year 2025, revenue rose 11% to $5.93 billion, and the net loss narrowed to $460 million from $698 million in the prior year. In the fourth quarter, "other revenue" surged 62% to $232 million, driven by a 71% jump in Snapchat+ subscriptions to 24 million. The company ended the year with 946 million global monthly active users.
Activist Pressure and Specs Ambitions
Activist investor Irenic Capital Management, which holds about 2.5% of Snap's Class A shares, has been pushing for deeper cost cuts, share buybacks, and a reassessment of the company's augmented reality glasses business, Specs. Irenic's Adam Katz argued that "Snap should be worth a lot more than $7 billion."
Snap plans to launch smart glasses powered by Qualcomm's Snapdragon XR platform before year-end, positioning the product for more autonomy and potential external investment. However, this puts Snap in direct competition with Meta's Ray-Ban AI glasses, one of the few consumer successes in the AI wearables market.
Analysts Cautious on Profitability Path
Russ Mould, investment director at AJ Bell, cautioned that while cost cuts may provide temporary relief and keep activists satisfied, there is still no clear evidence that Snap's business model is robust enough to generate sustainable profit and cash flow. According to Reuters, Snap is expected to report first-quarter revenue of approximately $1.53 billion and adjusted core profit near $233 million, both figures above Wall Street estimates.
The May 6 earnings report will be a pivotal moment for Snap, testing whether its ad business can remain resilient even as the company leans more heavily on subscriptions and AI-driven features. With a fresh analyst upgrade and a clear cost-cutting roadmap, the company has momentum, but the real test lies in proving its ability to deliver consistent earnings growth.
