Snap Stock Plunges 15% After Q2 Earnings; Here’s Why

Snapchat parent Snap Inc.'s Q2 earnings report appeared positive on the first look as the company posted year-over-year growth in both revenue and users. Still, Snap stock plunged around 15% in after-hours trading on August 6, according to Google Finance data, 

So, why this disconnect between Q2 earnings numbers and Snapchat share price movement? While user engagement metrics were a bright spot, a closer look at the company’s financial results revealed an ugly picture. 

In this blog we will decode what disappointed investors in Snap’s Q2 earnings, and why the stock took a plunge after the Snap earnings call.

Snapchat Q2 Earnings Decoded: User Growth vs. Financial Health

The core of the issue lies in the conflicting narratives presented by Snap's user metrics versus its financial performance. While the platform is more popular than ever, its ability to translate that popularity into profit is under serious question.

Snap Q2 Earnings' Key Metrics at a Glance

Source: Snap Earnings Report (Q2 2025)

Why Did Snap Stock Fall Despite “Positive” Q2 Earnings?

The positive user growth was not enough to mask the underlying financial weaknesses that ultimately drove the stock's decline in the after-hours trading session.

A major blow to investor confidence was Snap admitting that it made a "critical ad pricing mistake" on its platform. Because of a technical error, some advertisers were able to buy ads for much cheaper than they should have. This directly hurt Snap's revenue and shook investor confidence.

This error was the primary reason Average Revenue Per User (ARPU) came in at just $2.87, slightly missing expectations. For a company whose business is built on advertising, this kind of operational fumble raises serious questions about the reliability of its core monetization engine.

Snap CEO Evan Spiegel even addressed  it in an investor letter. He wrote that the company’s topline growth was affected by a bungled update to its ad platform that has since been addressed, the “timing of Ramadan” and the “effects of the de minimis changes,” referring to President Donald Trump’s trade policies.

Snapchat’s Widening Losses and Rising Costs

Despite a 9% increase in revenue, Snap's financial health appears to be deteriorating. The company's net loss widened, and key profitability metrics declined, painting a concerning picture for investors looking for a clear path to profitability.

Source: Snap Earnings Report (Q2 2025)

What disappointed investors further is Snap’s operating expenses surging by 10% to $654 million. This combination of rising costs and a growing net loss may have made the investors believe that the company is moving further away from sustainable profitability instead of moving closer to it.

Snapchat’s User Growth Paradox

Snap's ability to grow its user base is undeniable given that its Daily Active Users (DAUs) hit the 469 million market in Q2. The Snapchat+ subscription service also boasted nearly 16 million paid users, showing that the platform still has mass appeal.

The market’s reaction makes one thing clear: adding more users is not enough if you can’t earn from them. If ads are not bringing in money, then more users just mean more missed opportunities. Investors now want to see how numbers turn into real business in terms of income.

Negative Guidance Adds to Snap Investors’ Pessimism

Snap’s outlook for the next quarter offered little reassurance after a mixed Q2. While the guidance aligned with Wall Street expectations, it lacked the strength to offset recent performance concerns.

Snap Guidance Highlights:

• Revenue: $1.47 billion to $1.5 billion
• Daily Active Users (DAUs): Approximately 476 million

Despite being in line with estimates, the numbers did not signal any meaningful acceleration for the social media company. More notably, Snap chose not to provide a full-year forecast in its SEC filing, a move many investors read as a sign of limited long-term visibility and strategic uncertainty.

So, Snap's guidance matched expectations but it did not rebuild investor trust. In order to win confidence, it needs to do more than grow users. It must fix its ad platform, manage costs, and show a clear path to profits. Until then, strong user growth looks unlikely to convince the market.

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