Snap Inc.
11/05/2026 | Press release | Distributed by Public on 11/05/2026 05:04
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in "Risk Factors," "Note Regarding Forward-Looking Statements," and "Note Regarding User Metrics and Other Data."
Overview of Third Quarter 2026 Results
Our key user metrics and financial results for the three months ended September 30, 2026 were as follows:
User Metrics
•Monthly Active Users, or MAUs, increased 4% year-over-year to 977 million.
•Daily Active Users, or DAUs, increased 4% year-over-year to 495 million.
•Average revenue per user, or ARPU, was $3.48, compared to $3.16 in the prior year.
Financial Results
•Revenue was $1,722.5 million, compared to $1,506.8 million in the prior year, an increase of 14% year-over-year.
•Total costs and expenses were $1,645.8 million, compared to $1,635.2 million in the prior year.
•Net income (loss) was $56.5 million, compared to $(103.5) million in the prior year.
•Adjusted EBITDA was $382.6 million, compared to $182.0 million in the prior year.
•Diluted net income (loss) per share was $0.03, compared to $(0.06) in the prior year.
•Cash provided by operating activities was $210.5 million, compared to $146.5 million in the prior year.
•Free Cash Flow was $164.5 million, compared to $93.4 million in the prior year.
•Common shares outstanding was 1,718 million as of September 30, 2026, compared to 1,711 million as of September 30, 2025.
•Total common shares outstanding plus shares underlying stock-based awards was 1,932 million as of September 30, 2026, compared to 1,861 million as of September 30, 2025.
•Cash, cash equivalents, and marketable securities were $2.8 billion as of September 30, 2026.
Business and Macroeconomic Conditions
We periodically make changes to our business and priorities. In recent years, our focus has been on three strategic priorities: growing our community and deepening their engagement with our products, accelerating and diversifying our revenue growth, and investing in the future of augmented reality, including our investments in SPECS AR glasses. We believe that we can be successful in our current operating environment, with various macroeconomic factors and geo-political events and conflicts impacting our business, by rigorously prioritizing our investments and continuing to engage our community with our products while driving success for our advertising partners. In connection with these efforts, we have undertaken restructuring initiatives to further align our cost structure and investments with our strategic priorities, which may continue to affect our operations and financial results.
Macroeconomic factors and geo-political events and conflicts such as labor shortages and disruptions, supply chain disruptions, inflation, changes in interest and foreign currency exchange rates, banking instability, tariffs and retaliatory countermeasures, war and other armed conflict, and other risks and uncertainties have in the past and may continue to cause logistical challenges, increased input costs, and inventory constraints for our advertisers, which in turn may cause our advertisers to halt or decrease advertising spending on our platform. Such macroeconomic factors and geo-political events and conflicts may also negatively impact, in the short-term or long-term, the global economy, advertising
ecosystem, our customers and their budgets with us, user engagement, other user metrics, and our business, financial condition, and results of operations.
In addition, competition for advertising dollars has increased and demand growth on our advertising platform has slowed. We expect to continue to experience increased competition, which may result in reduced advertising demand, and could adversely affect our revenue growth, pricing, business, financial condition, and results of operations. Demand has also been disrupted by recent changes we made to our advertising platform, and, in the future, we may continue to experience adverse impacts to our revenue growth as a result of these changes.
Our revenue, particularly in North America, has further been impacted by platform policy changes and restrictions that affected our targeting, measurement, and optimization capabilities, and in turn our ability to measure the effectiveness of advertisements on our services. This has resulted in, and in the future is likely to continue to result in, reduced advertising revenue, especially if we are unable to mitigate these developments.
We compete with other companies in every aspect of our business. We must compete effectively for users and advertisers to grow our business and increase our revenue. These and other risks and uncertainties are further described in the section titled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Trends in User Metrics
We define MAU as a registered and logged-in Snapchat user who visits Snapchat through our applications or websites at least once during the 30-day period ending on the calendar month-end. We calculate average MAUs for a particular quarter by calculating the average of the MAUs as of each calendar month-end in that quarter. We define a DAU as a registered and logged-in Snapchat user who visits Snapchat through our applications or websites at least once during a defined 24-hour period. We calculate average DAUs for a particular quarter by adding the number of DAUs on each day of that quarter and dividing that sum by the number of days in that quarter. DAUs are broken out by geography because markets have different characteristics. We define ARPU as quarterly revenue divided by the average DAUs.
We assess the health of our business by measuring MAUs, DAUs, and ARPU because we believe that these metrics are important ways for both management and investors to understand engagement and monitor the performance of our platform. We also measure ARPU because we believe that this metric helps our management and investors to assess the extent to which we are monetizing our service. However, as our business and the way users engage with our platform evolve, we periodically review the metrics we use to evaluate our performance, including metrics broken out by geography, and may refine, change, or remove these metrics in the future in connection with changes to our products, our business, or how management believes we can best monitor engagement with and performance of our platform.
In the first quarter of 2027, among other changes to our user metrics, we plan to transition to global MAU as our primary audience metric. For a description of these changes, see the "Note Regarding User Metrics and Other Data" included elsewhere in this Quarterly Report on Form 10-Q.
User Engagement
We had 977 million MAUs on average in the third quarter of 2026, an increase of 34 million, or 4%, from the third quarter of 2025.
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Quarterly Average Monthly Active Users
(in millions)
|
||||||||
| Global | ||||||||
| YoY growth: | 7% | 7% | 7% | 7% | 7% | 6% | 5% | 4% | 4% | ||||||||||||||||||||||||||||||||||||||||||||||||||
We had 495 million DAUs on average in the third quarter of 2026, an increase of 18 million, or 4%, from the third quarter of 2025.
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Quarterly Average Daily Active Users (1)
(in millions)
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|||||
| Global | |||||
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YoY growth:
|
9% | 9% | 9% | 9% | 8% | 5% | 5% | 5% | 4% | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Numbers may not foot due to rounding.
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North America (2)
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Europe (3)
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|||||||||||||
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YoY growth:
|
-% | (1)% | (1)% | (2)% | (3)% | (5)% | (7)% | (7)% | (6)% | 4% | 4% | 3% | 3% | 1% | (1)% | (2)% | (2)% | (1)% | |||||||||||||||||||||||||||||||||||||||||||||||
(2)North America includes Mexico, the Caribbean, and Central America.
(3)Europe includes Russia and Turkey.
| Rest of World | ||||||||
| YoY growth: | 16% | 17% | 16% | 15% | 15% | 11% | 12% | 12% | 9% | |||||||||||||||||||||||
Monetization
We recorded revenue of $1,722.5 million for the three months ended September 30, 2026, compared to revenue of $1,506.8 million for the same period in 2025, an increase of 14% year-over-year. We monetize our business primarily through advertising and to a lesser extent through other revenue.
We measure our business using ARPU because it helps us understand the rate at which we are monetizing our daily user base. ARPU was $3.48 in the third quarter of 2026, compared to $3.16 in the third quarter of 2025. For purposes of calculating ARPU, we attribute revenue to regions based on our estimate of where revenue-generating activities occur, which is generally determined by the billing address of the customer. For advertising revenue, we allocate revenue based on the geographic location where advertising impressions are delivered, as this approximates revenue based on user activity. This differs from the presentation of our revenue by geography in the notes to our consolidated financial statements, where all revenue is based on the billing address of the customer.
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Quarterly Average Revenue per User
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| Global | ||||||||
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North America (1)
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Europe (2)
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(1)North America includes Mexico, the Caribbean, and Central America.
(2)Europe includes Turkey. Europe also includes Russia and Belarus; however, we maintain a policy prohibiting sales to entities in these countries.
| Rest of World | ||||||||
Results of Operations
Components of Results of Operations
Revenue
We generate the substantial majority of our revenue through the sale of our advertising products on Snapchat, which include Snap Ads and AR Ads, referred to as advertising revenue. Snap Ads may be subject to revenue sharing arrangements between us and the content partner. Additionally, we generate revenue from subscriptions, such as Snapchat+, Lens+, and Snapchat Platinum, which provide subscribers access to exclusive, experimental, and pre-release features, as well as an ad-free experience for Snapchat Platinum subscribers. We generate revenue from Memories Storage Plans, which provide subscribers with the ability to purchase cloud storage. We also generate revenue from partnerships which allow leading companies to connect with our global community on Snapchat and through subscriptions and sales of physical products. Sales of physical products are reported net of allowances for returns.
Cost of Revenue
Cost of revenue includes payments for infrastructure, content and developer partner costs, and advertiser partner and other costs. Infrastructure costs primarily consist of payments to third-party infrastructure partners for hosting our products, which include expenses related to storage, computing, and bandwidth. Content and developer partner costs primarily consist of fees paid to our content creators and publisher partners who share content on our platform through revenue sharing arrangements. Under these arrangements, we pay a portion of the fees we receive from advertisers for Snap Ads that are displayed within partner content on Snapchat. Advertising partner and other costs primarily consist of payments to third-party partners for fulfillment services, transaction processing fees, and other expenses directly related to providing our services. Cost of revenue includes personnel-related costs, including salaries, benefits, and stock-based compensation expense for our employees engaged in the delivery of our services. Cost of revenue also includes facilities and other supporting overhead costs, including depreciation and amortization, and inventory costs.
Research and Development Expenses
Research and development expenses primarily consist of personnel-related costs, including salaries, benefits, and stock-based compensation expense for our engineers, designers, and other employees engaged in the research and development of our products. Research and development expenses also include facilities and other supporting overhead costs, including depreciation and amortization. Research and development costs are expensed as incurred.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of personnel-related costs, including salaries, benefits, commissions, and stock-based compensation expense for our employees engaged in sales and sales support, business development, media, marketing, corporate partnerships, and customer service functions. Sales and marketing expenses also include costs incurred for advertising, market research, tradeshows, branding, marketing, promotional expense, and public
relations, as well as costs incurred for marketing events, which are recognized when the event occurs. Sales and marketing expenses also include facilities and other supporting overhead costs, including depreciation and amortization.
General and Administrative Expenses
General and administrative expenses primarily consist of personnel-related costs, including salaries, benefits, and stock-based compensation expense for our finance, legal, information technology, human resources, and other administrative teams. General and administrative expenses also include facilities and supporting overhead costs, including depreciation and amortization, and external professional services.
Interest Income
Interest income primarily consists of interest earned on our cash, cash equivalents, and marketable securities.
Interest Expense
Interest expense primarily consists of interest expense associated with our notes and commitment fees related to our revolving credit facility.
Other Income (Expense), Net
Other income (expense), net primarily consists of gains and losses on debt extinguishments, and gains and losses on strategic investments, marketable securities, and foreign currency transactions.
Income Tax Benefit (Expense)
We are subject to income taxes in the United States and numerous foreign jurisdictions. Our effective tax rates will vary depending on changes in the valuation of our deferred tax assets and liabilities, the relative proportion of foreign to domestic income, use of tax credits, and changes in tax laws.
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other items impacting net income (loss) from time to time. We consider the exclusion of these items in calculating Adjusted EBITDA to provide a useful measure for period-to-period comparisons of our business and for investors and others to evaluate our operating results in the same manner as does our management. See "Non-GAAP Financial Measures" for additional information and a reconciliation of net income (loss) to Adjusted EBITDA.
Discussion of Results of Operations
The following table sets forth our consolidated statements of operations data:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Consolidated Statements of Operations Data: | |||||||||||||||||||||||
| Revenue | $ | 1,722,471 | $ | 1,506,839 | $ | 4,850,255 | $ | 4,214,986 | |||||||||||||||
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Costs and expenses (1) (2):
|
|||||||||||||||||||||||
| Cost of revenue | 649,413 | 674,220 | 1,982,539 | 1,967,132 | |||||||||||||||||||
| Research and development | 477,678 | 453,418 | 1,498,066 | 1,320,908 | |||||||||||||||||||
| Sales and marketing | 298,036 | 256,215 | 835,446 | 772,025 | |||||||||||||||||||
| General and administrative | 220,628 | 251,348 | 702,658 | 736,805 | |||||||||||||||||||
| Total costs and expenses | 1,645,755 | 1,635,201 | 5,018,709 | 4,796,870 | |||||||||||||||||||
| Operating income (loss) | 76,716 | (128,362) | (168,454) | (581,884) | |||||||||||||||||||
| Interest income | 26,859 | 32,255 | 77,990 | 102,472 | |||||||||||||||||||
| Interest expense | (37,290) | (34,494) | (110,987) | (85,500) | |||||||||||||||||||
| Other income (expense), net | (36) | 27,570 | 20,452 | 75,816 | |||||||||||||||||||
| Income (loss) before income taxes | 66,249 | (103,031) | (180,999) | (489,096) | |||||||||||||||||||
| Income tax expense | (9,751) | (510) | (15,414) | (16,602) | |||||||||||||||||||
| Net income (loss) | $ | 56,498 | $ | (103,541) | $ | (196,413) | $ | (505,698) | |||||||||||||||
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Adjusted EBITDA (3)
|
$ | 382,647 | $ | 182,038 | $ | 865,595 | $ | 331,733 | |||||||||||||||
(1)Stock-based compensation expense included in the above line items:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Stock-based compensation expense: | |||||||||||||||||||||||
| Cost of revenue | $ | 1,407 | $ | 2,327 | $ | 5,804 | $ | 5,417 | |||||||||||||||
| Research and development | 176,447 | 171,649 | 543,864 | 495,146 | |||||||||||||||||||
| Sales and marketing | 54,421 | 51,236 | 147,095 | 154,386 | |||||||||||||||||||
| General and administrative | 22,514 | 35,151 | 71,255 | 104,638 | |||||||||||||||||||
| Total | $ | 254,789 | $ | 260,363 | $ | 768,018 | $ | 759,587 | |||||||||||||||
(2)Depreciation and amortization expense included in the above line items:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Depreciation and amortization expense: | |||||||||||||||||||||||
| Cost of revenue | $ | 1,365 | $ | 1,016 | $ | 4,212 | $ | 3,941 | |||||||||||||||
| Research and development | 31,051 | 27,127 | 91,826 | 74,963 | |||||||||||||||||||
| Sales and marketing | 7,938 | 5,487 | 22,284 | 15,418 | |||||||||||||||||||
| General and administrative | 4,271 | 8,884 | 17,944 | 25,930 | |||||||||||||||||||
| Total | $ | 44,625 | $ | 42,514 | $ | 136,266 | $ | 120,252 | |||||||||||||||
(3)See "Non-GAAP Financial Measures" for more information and for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.
The following table sets forth the components of our consolidated statements of operations data for each of the periods presented as a percentage of revenue:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Consolidated Statements of Operations Data: | |||||||||||||||||||||||
| Revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | 38 | 45 | 41 | 47 | |||||||||||||||||||
| Research and development | 28 | 30 | 31 | 31 | |||||||||||||||||||
| Sales and marketing | 17 | 17 | 17 | 18 | |||||||||||||||||||
| General and administrative | 13 | 17 | 14 | 18 | |||||||||||||||||||
| Total costs and expenses | 96 | 109 | 103 | 114 | |||||||||||||||||||
| Operating income (loss) | 4 | (9) | (3) | (14) | |||||||||||||||||||
| Interest income | 2 | 2 | 1 | 2 | |||||||||||||||||||
| Interest expense | (2) | (2) | (2) | (2) | |||||||||||||||||||
| Other income (expense), net | - | 2 | - | 2 | |||||||||||||||||||
| Income (loss) before income taxes | 4 | (7) | (4) | (12) | |||||||||||||||||||
| Income tax expense | (1) | - | - | - | |||||||||||||||||||
| Net income (loss) | 3 | % | (7) | % | (4) | % | (12) | % | |||||||||||||||
Three and Nine Months Ended September 30, 2026 and 2025
Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Revenue | $ | 1,722,471 | $ | 1,506,839 | $ | 4,850,255 | $ | 4,214,986 | |||||||||||||||
| Revenue as a dollar change | $ | 215,632 | $ | 635,269 | |||||||||||||||||||
| Revenue as a percentage change | 14 | % | 15 | % | |||||||||||||||||||
Revenue for the three and nine months ended September 30, 2026 increased $215.6 million and $635.3 million, respectively, compared to the same periods in 2025. The increase was driven by a $55.7 million and $197.2 million increase in advertising revenue for the three and nine months ended September 30, 2026, respectively. The increase in advertising revenue in both periods is primarily due to higher advertiser spending across native surfaces such as Sponsored Snaps and Promoted Places, reflecting in part a shift in advertiser spending from other advertising surfaces. The increase in total revenue was also driven by a $160.0 million and $438.0 million increase in other revenue for the three and nine months ended September 30, 2026, respectively, which is due to higher subscription revenue from growth in the number of subscribers and the introduction of new subscription products.
Cost of Revenue
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 649,413 | $ | 674,220 | $ | 1,982,539 | $ | 1,967,132 | |||||||||||||||
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Cost of revenue as a dollar change
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$ | (24,807) | $ | 15,407 | |||||||||||||||||||
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Cost of revenue as a percentage change
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(4) | % | 1 | % | |||||||||||||||||||
Cost of revenue for the three months ended September 30, 2026 decreased $24.8 million compared to the same period in 2025. The decrease was primarily driven by a $64.5 million decrease in content and developer partner costs as we shift to higher-margin advertising products such as Sponsored Snaps and Promoted Places, partially offset by a $33.1 million increase in advertising partner and other costs attributable to higher transaction processing fees due to growth in subscription revenue and a $7.1 million increase in infrastructure costs attributable to MAU growth of 4% compared to the prior year. Cost of revenue for the nine months ended September 30, 2026 increased $15.4 million compared to the same period in 2025. The increase was driven by a $92.9 million increase in advertising partner and other costs attributable to higher transaction processing fees due to growth in subscription revenue and a $42.0 million increase in infrastructure costs attributable to MAU growth, partially offset by a $127.7 million decrease in content and developer partner costs as we shift to higher-margin advertising products such as Sponsored Snaps and Promoted Places.
Research and Development Expenses
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
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Research and development expenses
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$ | 477,678 | $ | 453,418 | $ | 1,498,066 | $ | 1,320,908 | |||||||||||||||
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Research and development expenses as a dollar change
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$ | 24,260 | $ | 177,158 | |||||||||||||||||||
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Research and development expenses as a percentage change
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5 | % | 13 | % | |||||||||||||||||||
Research and development expenses for the three and nine months ended September 30, 2026 increased $24.3 million and $177.2 million, respectively, compared to the same periods in 2025. The increase in both periods was primarily due to investments in product development. The increase for the nine months ended September 30, 2026 was also driven by restructuring charges of $48.5 million primarily recognized in the second quarter of 2026.
Sales and Marketing Expenses
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Sales and marketing expenses
|
$ | 298,036 | $ | 256,215 | $ | 835,446 | $ | 772,025 | |||||||||||||||
|
Sales and marketing expenses as a dollar change
|
$ | 41,821 | $ | 63,421 | |||||||||||||||||||
|
Sales and marketing expenses as a percentage change
|
16 | % | 8 | % | |||||||||||||||||||
Sales and marketing expenses for the three and nine months ended September 30, 2026 increased $41.8 million and $63.4 million, respectively, compared to the same periods in 2025. The increase in both periods was primarily driven by higher advertising and marketing event costs. The increase for the nine months ended September 30, 2026 was also driven by restructuring charges of $29.4 million primarily recognized in the second quarter of 2026.
General and Administrative Expenses
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
General and administrative expenses
|
$ | 220,628 | $ | 251,348 | $ | 702,658 | $ | 736,805 | |||||||||||||||
|
General and administrative expenses as a dollar change
|
$ | (30,720) | $ | (34,147) | |||||||||||||||||||
|
General and administrative expenses as a percentage change
|
(12) | % | (5) | % | |||||||||||||||||||
General and administrative expenses for the three and nine months ended September 30, 2026 decreased $30.7 million and $34.1 million, respectively, compared to the same periods in 2025. The decrease in both periods was primarily driven by lower employee compensation and stock-based compensation expenses due to reduced headcount compared to the prior year. The decrease for the nine months ended September 30, 2026 was partially offset by restructuring charges of $42.0 million primarily recognized in the second quarter of 2026.
Interest Income
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Interest income
|
$ | 26,859 | $ | 32,255 | $ | 77,990 | $ | 102,472 | |||||||||||||||
|
Interest income as a dollar change
|
$ | (5,396) | $ | (24,482) | |||||||||||||||||||
|
Interest income as a percentage change
|
(17) | % | (24) | % | |||||||||||||||||||
Interest income for the three and nine months ended September 30, 2026 decreased $5.4 million and $24.5 million, respectively, compared to the same periods in 2025. The decrease in both periods was primarily driven by decreased investments in marketable debt securities and lower interest rates.
Interest Expense
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
|
Interest expense
|
$ | (37,290) | $ | (34,494) | $ | (110,987) | $ | (85,500) | |||||||||||||||
|
Interest expense as a dollar change
|
$ | (2,796) | $ | (25,487) | |||||||||||||||||||
|
Interest expense as a percentage change
|
8 | % | 30 | % | |||||||||||||||||||
Interest expense for the three and nine months ended September 30, 2026 increased $2.8 million and $25.5 million, respectively, compared to the same periods in 2025. The increase in both periods was primarily driven by additional interest expense on our 2034 Notes which were issued in August 2025 and which are discussed within Note 7 to our consolidated financial statements included elsewhere in this Quarterly Report.
Other Income (Expense), Net
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
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(NM = Not Meaningful)
|
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| Other income (expense), net | $ | (36) | $ | 27,570 | $ | 20,452 | $ | 75,816 | |||||||||||||||
| Other income (expense), net as a dollar change | $ | (27,606) | $ | (55,364) | |||||||||||||||||||
| Other income (expense), net as a percentage change | NM | (73) | % | ||||||||||||||||||||
Other income (expense), net for the three and nine months ended September 30, 2026 consists of non-operating income as well as foreign currency remeasurement gains and losses.
Other income, net for the three months ended September 30, 2025 was primarily driven by a $29.8 million gain on extinguishment associated with the August 2025 Note Repurchases, which is discussed within Note 7 to our consolidated financial statements included elsewhere in this Quarterly Report. Other income, net for the nine months ended September 30, 2025 was primarily driven by a $96.7 million gain on extinguishment associated with the 2025 Note Repurchases, which is discussed within Note 7 to our consolidated financial statements included elsewhere in this Quarterly Report, partially offset by $12.2 million in net losses on strategic investments.
Income Tax Benefit (Expense)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| (NM = Not Meaningful) | |||||||||||||||||||||||
| Income tax expense | $ | (9,751) | $ | (510) | $ | (15,414) | $ | (16,602) | |||||||||||||||
| Income tax expense as a dollar change | $ | (9,241) | $ | 1,188 | |||||||||||||||||||
| Income tax expense as a percentage change | NM | 7 | % | ||||||||||||||||||||
|
Effective tax rate
|
14.7 | % | (0.5) | % | (8.5) | % | (3.4) | % | |||||||||||||||
Income tax expense for the three and nine months ended September 30, 2026 was $9.8 million and $15.4 million, respectively, compared to an income tax expense of $0.5 million and $16.6 million, respectively, for the same periods in 2025. Our effective tax rate differs from the U.S. statutory tax rate primarily due to valuation allowances on our deferred tax assets as it is more likely than not that some or all of our deferred tax assets will not be realized.
Net Income (Loss) and Adjusted EBITDA
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (dollars in thousands) | |||||||||||||||||||||||
| Net income (loss) | $ | 56,498 | $ | (103,541) | $ | (196,413) | $ | (505,698) | |||||||||||||||
| Net income (loss) as a dollar change | $ | 160,039 | $ | 309,285 | |||||||||||||||||||
| Net income (loss) as a percentage change | 155 | % | 61 | % | |||||||||||||||||||
| Adjusted EBITDA | $ | 382,647 | $ | 182,038 | $ | 865,595 | $ | 331,733 | |||||||||||||||
| Adjusted EBITDA as a dollar change | $ | 200,609 | $ | 533,862 | |||||||||||||||||||
| Adjusted EBITDA as a percentage change | 110 | % | 161 | % | |||||||||||||||||||
Net income for the three months ended September 30, 2026 was $56.5 million, compared to a net loss of $103.5 million for the same period in 2025. Net loss for the nine months ended September 30, 2026 was $196.4 million,
compared to $505.7 million for the same period in 2025. The fluctuation in net income (loss) was primarily the result of the changes in revenues and expenses discussed above.
Adjusted EBITDA for the three and nine months ended September 30, 2026 was $382.6 million and $865.6 million, respectively, compared to $182.0 million and $331.7 million, respectively, for the same periods in 2025. The increase for both periods was primarily attributable to increased revenue and lower general and administrative expenses, partially offset by higher research and development expenses and higher sales and marketing expenses.
For a discussion of the limitations associated with using Adjusted EBITDA rather than GAAP measures and a reconciliation of this measure to net income (loss), see "Non-GAAP Financial Measures."
Liquidity and Capital Resources
Capital Resources
Cash, cash equivalents, and marketable securities were $2.8 billion as of September 30, 2026, primarily consisting of cash on deposit with banks and highly liquid investments in U.S. government securities, money market funds, corporate debt securities, and publicly traded equity securities. Our primary source of liquidity is cash generated through operating cash flows as well as financing activities. Our primary uses of cash include operating costs such as personnel-related costs, the infrastructure costs of the Snapchat application, facility-related capital spending, and acquisitions and investments. There are no known material subsequent events that could have a material impact on our cash or liquidity, except as disclosed herein. We may contemplate and engage in merger and acquisition activity that could materially impact our liquidity and capital resource position.
As of September 30, 2026, approximately 11% of our cash, cash equivalents, and marketable securities was held by our foreign subsidiaries, primarily in the United Kingdom. Cash held by our foreign subsidiaries is utilized to fund our foreign operations and may be repatriated, subject to certain limitations. Upon repatriation, these funds would be available to fund our domestic operations, but repatriation may result in additional tax liabilities. We maintain substantially all of our cash, cash equivalents, and marketable securities in accounts with major United States and multi-national financial institutions. We believe our existing cash balance in the United States is sufficient to fund our working capital needs.
As of September 30, 2026, we had $1.05 billion under our revolving credit facility (the "Credit Facility"), of which $250.0 million expires in May 2027 and $800.0 million expires in February 2030. The interest rates for the Credit Facility are determined based on a formula using certain market rates, as described in Note 7 to our consolidated financial statements included elsewhere in this Quarterly Report. The Credit Facility also contains an annual commitment fee of 0.10% on the daily undrawn balance of the facility. As of September 30, 2026, we had $111.4 million in the form of outstanding standby letters of credit, with no amounts outstanding under the Credit Facility.
Material Cash Requirements
Debt
As of September 30, 2026, we had outstanding debt in the form of Senior Notes and Convertible Notes for an aggregate principal amount of $3.4 billion, which mature between 2027 and 2034. Short-term and long-term future interest payment obligations as of September 30, 2026 were $145.3 million and $824.5 million, respectively.
Under certain circumstances, holders of the outstanding Convertible Notes may convert all or a portion of their notes prior to the applicable maturity date. Upon conversion, the notes may be settled in cash, shares of our Class A common stock, or a combination of cash and shares of our Class A common stock, at our election. As of September 30, 2026 the Convertible Notes will not be eligible for optional conversion during the fourth quarter of 2026. The outstanding balance of the 2026 Notes was repaid in accordance with its contractual terms.
For additional discussion on our debt, see Note 7 to our consolidated financial statements included elsewhere in this Quarterly Report.
Contractual Commitments
We have non-cancelable contractual agreements primarily related to the hosting of our data processing, storage, and other computing services, as well as lease, content and developer partner, and other commitments. We had $2.6 billion in commitments as of September 30, 2026, largely due within three years. For additional discussion on our leases, see Note 9 to our consolidated financial statements included elsewhere in this Quarterly Report.
Stock Repurchases
In November 2025 and February 2026, our board of directors authorized two stock repurchase programs for the repurchase of up to $500.0 million of our Class A common stock under each program. During the nine months ended September 30, 2026, we repurchased and retired a total of 98.5 million shares of our Class A common stock for $601.0 million, including costs associated with the repurchases. We completed the November 2025 program in January 2026, and the remaining availability under the February 2026 program as of September 30, 2026 was $150.0 million. Repurchases of Class A common stock from the remaining availability may be made from time to time and will be funded from existing cash and cash equivalents. Repurchases have been authorized through February 2027 but the program may be modified, suspended, or terminated at any time during the program.
Contingencies
We are involved in claims, lawsuits, tax matters, government investigations, and proceedings arising in the ordinary course of our business. We record a provision for a liability when we believe that it is both probable that a liability has been incurred and the amount can be reasonably estimated. We also disclose material contingencies when we believe that a loss is not probable but reasonably possible. Significant judgment is required to determine both probability and the estimated amount. Such claims, suits, and proceedings are inherently unpredictable and subject to significant uncertainties, some of which are beyond our control. Many of these legal and tax contingencies can take years to resolve. Should any of these estimates and assumptions change or prove to be incorrect, it could have a material impact on our results of operations, financial position, and cash flows. For additional discussion on our pending legal proceedings, see Note 8 to our consolidated financial statements included elsewhere in this Quarterly Report.
We believe our existing cash balance is sufficient to fund our ongoing working capital, investing, and financing requirements for at least the next 12 months. Our future capital requirements will depend on many factors including our growth rate, headcount, sales and marketing activities, research and development efforts, the introduction of new features, products, and acquisitions, and continued user engagement. We continually evaluate opportunities to issue or repurchase equity or debt securities, obtain, retire, or restructure credit facilities or financing arrangements, or declare dividends for strategic reasons or to further strengthen our financial position.
Sources and Uses of Cash and Related Trends
The following table sets forth the major components of our consolidated statements of cash flows for the nine months ended September 30, 2026 and 2025:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
|
(in thousands)
|
|||||||||||
| Net cash provided by operating activities | $ | 713,477 | $ | 386,592 | |||||||
| Net cash provided by (used in) investing activities | (68,847) | 110,280 | |||||||||
| Net cash used in financing activities | (655,269) | (591,607) | |||||||||
| Change in cash, cash equivalents, and restricted cash | $ | (10,639) | $ | (94,735) | |||||||
|
Free Cash Flow (1)
|
$ | 570,998 | $ | 231,633 | |||||||
(1)For information on how we define and calculate Free Cash Flow and a reconciliation of net cash provided by (used in) operating activities to Free Cash Flow, see "Non-GAAP Financial Measures."
Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities was $713.5 million for the nine months ended September 30, 2026, compared to $386.6 million for the same period in 2025, resulting primarily from our net income (loss), adjusted for non-cash items, including stock-based compensation expense of $768.0 million, and depreciation and amortization expense of $136.3 million. Net cash provided by operating activities was also driven by a $92.7 million decrease in accounts receivable, primarily due to the timing of collections.
Net Cash Provided by (Used in) Investing Activities
Net cash used in investing activities was $(68.8) million for the nine months ended September 30, 2026, compared to net cash provided by investing activities of $110.3 million for the same period in 2025. Our investing activities for the nine months ended September 30, 2026 primarily consisted of purchases of marketable securities of $796.0 million and purchases of property and equipment of $142.5 million, partially offset by maturities of marketable securities of $638.3 million and sales of marketable securities of $303.8 million. Our investing activities for the nine months ended September 30, 2025 primarily consisted of maturities of marketable securities of $785.3 million and sales of marketable securities of $539.7 million, partially offset by purchases of marketable securities of $1,015.3 million and purchases of property and equipment of $155.0 million.
Net Cash Provided by (Used in) Financing Activities
Net cash used in financing activities was $655.3 million for the nine months ended September 30, 2026, compared to net cash used in financing activities of $591.6 million for the same period in 2025. Our financing activities for the nine months ended September 30, 2026 primarily consisted of repurchases of our Class A common stock for $601.0 million and the repayment of the 2026 Notes for $47.0 million. Our financing activities for the nine months ended September 30, 2025 primarily consisted of the 2025 Note Repurchases for $2.0 billion, repurchases of our Class A common stock for $500.6 million, deferred payments for acquisitions of $67.5 million, and the repayment of the 2025 Notes for $36.2 million, partially offset by the issuance of the 2033 Notes and 2034 Notes for net proceeds of $2.0 billion.
Free Cash Flow
Free Cash Flow was $571.0 million for the nine months ended September 30, 2026, compared to $231.6 million for the same period in 2025. Free Cash Flow in all periods was composed of net cash provided by operating activities, resulting primarily from net income (loss), adjusted for non-cash items and changes in working capital. Free Cash Flow also included purchases of property and equipment of $142.5 million for the nine months ended September 30, 2026, compared to $155.0 million for the same period in 2025. Purchases of property and equipment in all periods are primarily related to improvements to our leased facilities to support our team workspaces. See "Non-GAAP Financial Measures."
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We use the non-GAAP financial measure of Free Cash Flow, which is defined as net cash provided by (used in) operating activities, reduced by purchases of property and equipment. We believe Free Cash Flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business and is a key financial indicator used by management. Additionally, we believe that Free Cash Flow is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue generating activities. Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth.
We use the non-GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss), excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense; payroll and other tax expense related to stock-based compensation; and certain other items impacting net income (loss) from time to time. We believe that Adjusted EBITDA helps identify
underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA.
We believe that both Free Cash Flow and Adjusted EBITDA provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decision-making. We are presenting the non-GAAP measures of Free Cash Flow and Adjusted EBITDA to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry.
These non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures compared to the closest comparable GAAP measure. Some of these limitations are that:
•Free Cash Flow does not reflect our future contractual commitments;
•Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets and amortization of acquired intangible assets and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future;
•Adjusted EBITDA excludes stock-based compensation expense and payroll and other tax expense related to stock-based compensation, which have been, and will continue to be for the foreseeable future, significant recurring expenses in our business and an important part of our compensation strategy; and
•Adjusted EBITDA excludes income tax benefit (expense).
The following table presents a reconciliation of Free Cash Flow to net cash provided by (used in) operating activities, the most comparable GAAP financial measure, for each of the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Free Cash Flow reconciliation: | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 210,484 | $ | 146,488 | $ | 713,477 | $ | 386,592 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Purchases of property and equipment | (46,031) | (53,044) | (142,479) | (154,959) | |||||||||||||||||||
| Free Cash Flow | $ | 164,453 | $ | 93,444 | $ | 570,998 | $ | 231,633 | |||||||||||||||
The following table presents a reconciliation of Adjusted EBITDA to net income (loss), the most comparable GAAP financial measure, for each of the periods presented:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Adjusted EBITDA reconciliation: | |||||||||||||||||||||||
| Net income (loss) | $ | 56,498 | $ | (103,541) | $ | (196,413) | $ | (505,698) | |||||||||||||||
| Add (deduct): | |||||||||||||||||||||||
| Interest income | (26,859) | (32,255) | (77,990) | (102,472) | |||||||||||||||||||
| Interest expense | 37,290 | 34,494 | 110,987 | 85,500 | |||||||||||||||||||
| Other (income) expense, net | 36 | (27,570) | (20,452) | (75,816) | |||||||||||||||||||
| Income tax expense | 9,751 | 510 | 15,414 | 16,602 | |||||||||||||||||||
|
Depreciation and amortization (1)
|
44,597 | 42,514 | 134,892 | 120,252 | |||||||||||||||||||
|
Stock-based compensation expense (1)
|
255,227 | 260,363 | 741,947 | 759,587 | |||||||||||||||||||
| Payroll and other tax expense related to stock-based compensation | 6,107 | 7,523 | 28,705 | 33,778 | |||||||||||||||||||
|
Restructuring charges (2)
|
- | - | 128,505 | - | |||||||||||||||||||
| Adjusted EBITDA | $ | 382,647 | $ | 182,038 | $ | 865,595 | $ | 331,733 | |||||||||||||||
(1)Stock-based compensation expense and depreciation and amortization expense may not agree to reported GAAP amounts due to restructuring charges.
(2)Restructuring charges primarily include cash severance, stock-based compensation expense, depreciation expense and other charges associated with the restructuring. These charges are not reflective of underlying trends in our business. Refer to Note 14 in our consolidated financial statements.
Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with GAAP. Preparing these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
The critical accounting policies, estimates, assumptions, and judgments that we believe to have the most significant impact on our consolidated financial statements are revenue recognition, valuation of assets, loss contingencies, and income taxes.
There have been no material changes to our critical accounting policies and estimates as described in our Annual Report.
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