A view of the atmosphere during the Snap Partner Summit 2023 at the Barker Hangar on April 19, 2023 in Santa Monica, California.

Joe Scarnici | Getty Images Entertainment | Getty Images

A click shares jumped 28% on Friday after the company surprised Wall Street by posting a profit and reporting sales and user numbers that beat analysts’ estimates.

The stock rose $3.15 to close at $14.55, its biggest percentage gain since 2022. Even after the rally, the stock is down 14% for the year after a 31% decline in February.

First-quarter revenue rose 21 percent to $1.19 billion from $989 million a year earlier, beating analysts’ estimates of $1.12 billion in sales, according to LSEG.

The company reported adjusted earnings per share of 3 cents, while analysts expected a loss of 5 cents. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $46 million, compared with analysts’ expectations for a loss of $68 million.

Snap said adjusted EBITDA “exceeded our expectations” and was driven primarily by operating expense discipline as well as accelerating revenue growth.

Snap has been working to rebuild its ad business after the digital ad market stumbled in 2022. Its investments are starting to pay off. The company said in its investor letter that the revenue growth was primarily due to improvements in the advertising platform as well as demand for its direct response advertising solutions.

“I think more broadly we saw a much more robust brand environment that played out across all of our regions in Q1,” CFO Derek Andersen said on the earnings call.

User growth was also better than expected. Snap reported 422 million daily active users (DAUs) in the first quarter, up 10% year over year and beating the average analyst estimate of 420 million, according to StreetAccount.

In February, Snap announced it would cut 10% of its global workforce, or about 500 employees. The company said on Thursday that headcount and personnel costs would “increase modestly” for the rest of the year.

Advertising revenue totaled $1.11 billion in the first quarter. Snap’s Other Revenue category, which is primarily driven by Snapchat+ subscribers, reached $87 million, up 194% year-over-year. Snap reported more than 9 million Snapchat+ subscribers for the period.

While Snap’s growth was the fastest since March 2022, it still lagged behind Meta, which reported a 27% rise in its better-than-expected first-quarter results on Wednesday. Meta shares tumbled anyway after the company issued a soft forecast and spooked investors with talk of its long-term investments.

For the second quarter, Snap expects to report revenue between $1.23 billion and $1.26 billion, compared with analysts’ expectations of $1.22 billion, according to StreetAccount.

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