Snap Inc. SNAP -23.60% posted its first quarterly profit and signaled it is adjusting to disruptions in the digital-advertising market caused by Apple Inc. privacy policy changes that are affecting Facebook parent Meta Platforms Inc.
Snap on Thursday posted a net profit of $22.6 million in the most recent quarter after sales advanced 42% to $1.3 billion from the year-ago period, beating Wall Street expectations.
The social-media company’s shares were hit hard in trading ahead of the numbers after Meta on Wednesday said it would suffer a $10 billion revenue loss this year from the software changes Apple made to ad tracking through its iOS software.
Shares in Snap rallied after the earnings release, advancing more than 50% in after-hours trading. That followed a 24% drop on Thursday, as technology stocks sold off broadly on some disappointing earnings.
Snap Chief Financial Officer Derek Andersen said elements of the company’s advertising business “began to recover from the impact of the iOS platform changes quicker than we anticipated.”
The Apple software changes, introduced last spring, require apps to ask users whether they want to be tracked. Many users have opted out, making it more difficult for advertisers to target their ads at specific groups and receive feedback about how their targeted ads are doing, riling elements of the digital ad market.
Companies like Snap and Meta have begun to pursue workarounds to satisfy their advertiser customers.
Snap said it is developing tools to help advertisers address the problems posed by Apple’s changes. “We are pleased with the early progress,” said Jeremi Gorman, Snap’s chief business officer, adding it would take some time to fully adjust.
Tom Johnson, global chief digital officer at media-services company WPP Mindshare Worldwide, said, “Snap seems to be faring better than its larger rivals who are more exposed to the same pressures.”
The digital-advertising market broadly has been hot. Google parent Alphabet Inc. this week posted strong sales growth, propelled by its dominance in online search, video and internet ad sales. Microsoft Corp. , which sells ads on LinkedIn, its Bing search engine and some other products, said the ad market was strong and would advance further this year when it reported quarterly earnings last week.
Snap, in its results, forecast sales of up to $1.08 billion for the current quarter, beating average analyst expectations, according to a survey by FactSet.
Snap also reported a 20% year-over-year increase in daily active users for its Snapchat app that is popular with teens and young adults, many abroad. Meta lost about a million users globally in the quarter and stagnated in the U.S. and Canada.
Write to Meghan Bobrowsky at Meghan.Bobrowsky@wsj.com
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Appeared in the February 4, 2022, print edition as ‘Ads Propel Snap to First Quarterly Profit.’
