Snap Inc. experienced a significant 10% surge in late trading following the release of its third-quarter earnings report, which exceeded analyst expectations thanks to aggressive artificial intelligence integration and substantial growth in paid subscriptions. The parent company of Snapchat reported quarterly revenue of $1.37 billion, representing a 15% year-over-year increase and slightly beating analyst estimates of $1.36 billion.
CEO Evan Spiegel attributed the positive performance to several AI-driven initiatives that are beginning to show tangible results. The company has rolled out AI-generated collage features and implemented machine learning algorithms for enhanced content personalization, both designed to boost user engagement on the platform. These efforts appear to be paying off, with daily active users growing by 11 million people in Q3, marking a 9% year-over-year increase to reach 443 million users.
A particularly notable development is Snap’s introduction of AI tools specifically designed for content creators. During the earnings call, Spiegel revealed that the company began testing a new AI video generation tool in Q3 that enables creators to produce engaging videos using simple text or image prompts. This creator-focused strategy has yielded impressive results, with the number of creators posting content growing approximately 50% year-over-year in the third quarter.
Snapchat+, the platform’s $3.99-per-month premium subscription service, has emerged as another significant revenue driver. Launched in 2022 during a period of declining ad revenue, the paid tier reached 12 million subscribers in Q3, more than doubling year-over-year and contributing approximately $123 million to quarterly revenue.
Despite these positive indicators, Snap continues to face significant challenges. The company reported a $153 million loss in Q3, though this represents an improvement from the $368 million loss recorded in the same quarter of 2023. Snap’s user base remains substantially smaller than competitors Meta (3.3 billion users) and TikTok (over 1 billion users), creating ongoing pressure in the battle for advertising revenue. Jefferies analysts noted that the performance gap between Snap and industry giants Meta and Google continues to widen, accelerating Snap’s market share losses. The company’s stock remains down over 35% year-to-date, and it has missed analyst expectations twice in the last four quarters.
Key Quotes
In Q3, we began testing a new AI video generation tool that enables creators to generate engaging videos with a simple text or image prompt
CEO Evan Spiegel announced this during the earnings call, highlighting Snap’s push into generative AI tools for content creators. This represents a significant strategic move to compete with platforms like TikTok and Instagram by empowering creators with AI capabilities.
Our efforts to support creators have contributed to the number of creators posting content growing approximately 50% year-over-year in Q3
Spiegel connected the AI tool rollout directly to measurable growth in creator activity, demonstrating that the AI investments are producing concrete results in platform engagement and content volume.
Our Take
Snap’s earnings reveal a company at a crossroads, using AI as a lifeline in an increasingly competitive social media landscape. The 50% growth in creator content is particularly impressive and suggests that generative AI tools are not just gimmicks but genuine productivity enhancers that creators value. However, the continued losses and shrinking market share relative to Meta and Google raise questions about long-term viability. What’s most interesting is how Snap is positioning AI not just as a user-facing feature but as a creator enablement tool—a strategy that could build stronger platform loyalty. The doubling of paid subscribers also indicates that users are willing to pay for AI-enhanced experiences, validating the premium tier strategy. Still, with the stock down 35% year-to-date, investors remain skeptical about whether AI innovations alone can overcome Snap’s fundamental scale disadvantage in the attention economy.
Why This Matters
This story represents a critical inflection point for social media companies leveraging AI to drive growth and engagement. Snap’s experience demonstrates how artificial intelligence is becoming essential infrastructure for digital platforms, not just a novelty feature. The 50% year-over-year growth in creator content directly attributable to AI video generation tools showcases how generative AI is democratizing content creation and potentially reshaping the creator economy.
The success of AI-driven personalization and engagement features at Snap signals a broader industry trend where machine learning algorithms are becoming the primary competitive differentiator for social platforms. This has significant implications for smaller platforms competing against tech giants with deeper AI research capabilities and larger datasets. Snap’s ability to implement effective AI features despite its smaller scale suggests that focused AI applications can level the playing field to some degree.
For the broader business landscape, Snap’s dual revenue strategy—combining AI-enhanced advertising with paid subscriptions—offers a blueprint for how digital platforms can diversify revenue streams in an increasingly competitive market. The fact that AI features are driving both user engagement and willingness to pay for premium services underscores the tangible value consumers place on AI-enhanced experiences.
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Source: https://www.businessinsider.com/snap-surges-gets-major-boost-from-ai-push-paid-users-2024-10