Snap's stock soared: the company expects sales to rise ahead of the launch of its AR glasses

Shares of Snap, the developer of the popular messaging app Snapchat, rose nearly 15% during trading on August 4. The previous evening, the company released its second-quarter financial report, in which it reported revenue that exceeded analysts’ expectations—thanks to increased advertising spending during the World Cup. Snap also presented an optimistic outlook for the third quarter. The company thus demonstrated confidence ahead of the September commercial launch of its first augmented reality glasses, according to Bloomberg.

For the quarter ended June 30, Snap’s revenue jumped 19% year-over-year to $1.6 billion—a figure that exceeded analysts’ expectations by 3.9%, Reuters notes, citing data from LSEG. Furthermore, quarterly advertising revenue, which accounts for the bulk of Snap’s sales, rose 9% year-over-year to $1.28 billion, Bloomberg reports. The result was partly driven by activity from major North American advertisers, as well as increased advertising spending by companies during the World Cup, Snap CEO Evan Spiegel said.

Snap is steadily increasing its appeal to advertisers by focusing on formats that drive direct sales (direct-response advertising), according to Reuters. To this end, Snap is enhancing its Ads Manager platform: new AI tools now automatically manage brands’ budgets and identify users who are most likely to make a purchase.

After experiencing its first decline in user numbers in many years at the end of 2025, Snap reported strong audience growth for the first six months of 2026. The number of daily active users (DAU) increased by 5% compared to the previous quarter, reaching 493 million and exceeding analysts’ expectations. Compared to the previous quarter, Snap’s U.S. audience also showed growth—primarily driven by users aged 35 and older, Spiegel said. However, on a year-over-year basis, DAU declined by nearly 7% across North America as a whole and by approximately 2% in Europe.

Nevertheless, Snap expects revenue in the third—current—quarter of 2026 to grow further, reaching between $1.7 billion and $1.74 billion. The midpoint of this range—$1.72 billion— is 1.2% higher than analysts’ average forecast for this metric. The company also expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of between $300 million and $350 million in the third quarter. The midpoint of this forecast ($325 million) is 1.5% below the $329.9 million expected by LSEG analysts, but the upper end of the range exceeds the analyst consensus by 6.1%.

Although Snap’s sales are growing, the company has struggled to win investors’ trust in recent years due to its volatile advertising business, which has been affected by technical glitches and global events, Bloomberg notes. For example, earlier this year, Snap warned that its advertising business could suffer due to the war in the Middle East—a prospect that sent the company’s stock tumbling after the release of its first-quarter report, Bloomberg recalls. However, in a letter to shareholders published on Monday, Snap made no mention of the conflict between the U.S. and Iran or its potential impact on the company’s business.

Instead, Spiegel focused on the company’s launch of its own augmented reality (AR) glasses—Specs. The company hopes this will give Snap a boost, strengthen its position in the AI race, and attract a new audience, since users won’t need a Snapchat account to use the glasses. Snap unveiled these glasses in June. The device is integrated with artificial intelligence, including support for the My AI voice assistant, and runs on neural networks from OpenAI. The company will share details about Specs on September 16 at a presentation in Los Angeles. The glasses are expected to go on sale this fall.

However, during the conference call, some investors expressed skepticism about the commercialization of the product, Bloomberg notes. They questioned Specs’ ability to make a breakthrough in a market where competitors have far greater resources, and asked about the investment limits for this product. In response, Spiegel stated that the prospects for the new glasses are enormous, and Snap’s advantage lies in the fact that it is a “pioneer.” While competitors are releasing smart glasses—without augmented reality—Snap is already preparing to launch a headset backed by millions of AR apps ready for it.

Following the report’s publication on Monday, Spiegel pointed out that Snapchat also launched amid fierce competition but went on to succeed. While acknowledging that such AR technologies are unlikely to become mainstream by the end of the decade, the company’s CEO assured investors that Snap is approaching the project’s financing with great discipline.

Snap’s management warned of a challenging regulatory environment in the U.S. and abroad amid a global trend toward restricting social media use by teenagers. In addition, in the U.S. domestic market, the company is embroiled in a wave of lawsuits: thousands of individuals and school districts are accusing tech giants of intentionally fostering addiction among minors. Some school districts are seeking compensation for the costs of mental health support programs for students, while certain states claim that specific features of Snapchat violate laws protecting children online. Snap emphasizes that these lawsuits could significantly impact its business and future financial results.

The situation is further complicated by the fact that, amid growing regulatory pressure, the company has to contend with fierce competition from larger players, primarily Meta (the owner of Facebook and Instagram), Reuters reports.

Despite the rise on August 4, Snap’s stock has fallen 30% year-to-date. The current Wall Street analyst consensus on the company’s stock is “Hold”: 34 out of 48 analysts covering the company share this view. Eleven analysts maintain a positive outlook on the stock—they recommend buying Snap shares—while three advise selling the stock.

This article was AI-translated and verified by a human editor