Advertising made up about a quarter of Snap’s added revenue in the third quarter, by our arithmetic on its results release and investor letter, filed with the SEC on 4 November, and its 2025 10-Q. Revenue rose $215.6 million from a year earlier to $1.72 billion. Other Revenue, which Snap says grew 84%, accounts for about $159 million of that, or about 74%, by our arithmetic.
Snap says advertising revenue grew 4%. Net income was $56 million, against a $104 million loss a year earlier. Adjusted EBITDA was $383 million and free cash flow $164 million. Snap guided fourth-quarter revenue of $1.950 billion to $1.985 billion and adjusted EBITDA of $490 million to $525 million.
Business Pill · Incrementality
An evergreen Business Engineer explainer on incrementality in advertising. It teaches the general idea only and does not discuss Snap.
The key insight: Snap added $215.6 million of third-quarter revenue from a year earlier, and advertising supplied about $56 million of it, about a quarter, by our arithmetic from its stated 84% Other Revenue growth and its 2025 10-Q; Other Revenue, led by Snapchat+, Memories Storage and Lens+, supplied about $159 million.
Update, 4 Nov, 22:53Z: Snap shares fell in after-hours trading. Snap’s after-hours price was $5.49 at 5:52 PM ET (22:52 UTC) on 4 November, down $0.42, or 7.11%, from its regular-session close of $5.91, according to Nasdaq.com. The shares had closed up 5.72% on the day. Nasdaq.com lists an after-hours low of $5.10 at 4:19 PM ET, about 13.7% below the close, by our arithmetic. These are after-hours trades, not a close. A trending topic on X put the drop at 10%.
The trending topic described a “revenue miss”. Snap reported revenue of $1,722.5 million, up 14%, which its letter says was “within our prior guidance range of $1.70 to $1.74 billion”. Wall St Engine’s earnings card, embedded below, put the estimate at $1.73 billion and marks revenue in red as below it, as it does daily active users: 495 million against 497.8 million estimated. The same card shows EPS, adjusted EBITDA, free cash flow and ARPU above its estimates.
Snap’s letter guided: “Our guidance range for Q4 revenue is $1.950 billion to $1.985 billion.” It also said: “Beginning with our Q1 2027 results, global monthly active users (MAU) will become our primary audience metric.”
Snap’s 10-Q for the third quarter of 2025 put Other revenue at $189.7 million and advertising revenue at $1,317.1 million. At the 84% growth the letter states, Other revenue was about $349 million this quarter, and advertising revenue about $1,373 million, up about $56 million, by our arithmetic. That is about 4.3% growth, in line with the 4% Snap reports. A year earlier, advertising revenue had risen $67.8 million, by our arithmetic on the 2025 10-Q.
A quarter earlier the mix was different. The second-quarter 10-Q shows advertising revenue of $1,282.5 million against $1,173.5 million, up 9.3%, or $109.0 million, by our arithmetic. So advertising growth went from about 9% in the second quarter to 4% in the third.
The letter names one cause: “However, upper funnel brand advertising declined year-over-year, weighing on our overall growth.” It adds: “While advertising revenuegrowth remains below our ambitions, advertisers are seeing the benefits of our performance improvements.”
On the other side, Snap says it “surpassed 30 million paid subscribers across Snapchat+, Memories Storage, and Lens+”. Its second-quarter 10-Q says Other revenue “primarily consists of revenue from subscriptions” and “also includes amounts earned from partnerships”.
Snap’s North America daily active users and North America average revenue per user, indexed to the second quarter of 2025 = 100, from the supplemental table in its third-quarter 2026 results release filed on 4 November 2026. The index values are our arithmetic.
Announcements: ๐น SPECS: Launched for augmented reality
Other Q3 Metrics: ๐น Monthly Active Users: 977M; +4% YoY
Key Updates: ๐น Net Income: $56M; positive net income in Q3
Comments: ๐ธ โAI is becoming a significant advantage for our teams and advertising platform, and we continue to strengthen our business while investing in our long-term vision for augmented reality with the launch of SPECS.โ
Wall St Engine’s earnings card for Snap’s third quarter of 2026, posted on 4 November. It lists revenue of $1.72 billion against a $1.73 billion estimate, EPS of $0.03 against $0.00, adjusted EBITDA of $383 million against $337 million, and 495 million daily active users against a 497.8 million estimate. The piece checks each figure against Snap’s filed release.
What Snap Says AI Is Doing
Evan Spiegel, co-founder and chief executive, said in the release: “AI is becoming a significant advantage for our teams and advertising platform, and we continue to strengthen our business while investing in our long-term vision for augmented reality with the launch of SPECS.”
On ad ranking, chief commercial officer Ronan Harris wrote: “AI is helping us extend that progress through innovations like Dynamic Product Ads Generative Retrieval and Agentic Recommendations.” He says these and related changes “have already contributed to an over 2.5% increase in Pixel Purchase conversions”. For campaigns optimized for app purchases, purchase volume more than doubled, average cost per purchase fell about 24% and revenue grew over 54%, the letter says.
Inside the company, Spiegel wrote that “our engineering teams more than doubled the number of merged pull requests year-over-year, while the defect rate per merged pull request declined over 71%”. For advertisers, “AI search now resolves over 92% of help-center sessions, while support cases declined 35% year-over-year”.
On subscriptions, the letter says “Innovative AI-powered features have helped Lens+ exceed our expectations”. On costs, chief financial officer Doug Hott narrowed full-year Infrastructure Costs guidance to $1.65 billion to $1.66 billion, from $1.65 billion to $1.70 billion, “as we have been able to increase our investments in AI and ML without increasing our overall infrastructure costs”. The top of that range is $40 million lower, by our arithmetic.
North America and the Metric Switch
Daily active users rose 4% to 495 million and monthly active users to 977 million. In North America, daily users were 92 million, against 98 million a year earlier: about 6 million fewer, by our arithmetic. Snap’s table shows North America daily users down from a year earlier in each of the six quarters it lists.
North America still earned more. Its revenue rose 13% to $1,014.3 million, and revenue per daily user there rose 20% to $11.07. Since the second quarter of 2025, North America daily users are down to 93.9 on an index of 100, while North America ARPU is up to 132.9, by our arithmetic.
From its first-quarter 2027 report, Snap plans to make global MAU its primary audience metric and to stop reporting regional DAU and regional ARPU. The release says: “While DAU remains an important measure of engagement, we no longer believe it is the best primary measure of long-term value.” ARPU will then be revenue divided by global MAU, and MAU will count activity in the last 30 days of the quarter.
Costs, Cash and Specs
Hott wrote that the total cost structure grew 1%, and cited “approximately 93% of incremental revenue flowing through to Adjusted EBITDA”. Full-time employees fell 13% to 4,540. Gross margin, revenue minus cost of revenue, was 62.3% against 55.3% a year earlier, by our arithmetic, as cost of revenue fell 3.7%.
Trailing twelve-month free cash flow reached $777 million, the letter says. Shares outstanding plus shares underlying stock-based awards were about 1.93 billion, up 3.8%. Snap says that following the expected completion of its current repurchase program in the fourth quarter, it intends to pursue “a multi-year approach to dilution management”.
On Specs, Spiegel wrote: “By combining see-through augmented reality with AI, we see an opportunity for computers to understand more of what we are experiencing and provide useful information and assistance in the moment.” The fourth-quarter outlook “includes our planned investment in SPECS, which we continue to pace against product, ecosystem, and economic milestones”.
Wall St Engine’s earnings card put consensus at $1.73 billion of revenue, $0.00 of EPS, $337 million of adjusted EBITDA and 497.8 million daily users.
What the Risk Factors Say
Snap’s third-quarter 10-Q had not been filed on EDGAR when we read the filings. Its second-quarter 10-Q added one factor against the 2025 10-K: “Our business could be negatively impacted as a result of stockholder activism.” It restates the advertising factor: “We generate a substantial majority of our revenue from advertising.” The largest named theme, by our count of words, is legal, antitrust and tax, at 18.3%.
Go deeper, 5 Nov, 07:41Z: how Snap’s ad growth compares. In the same quarter, Meta’s advertising revenue grew 26% and Reddit’s ad revenue 54%, according to their results releases, against 4% at Snap. YouTube ads grew about 9.2%, by our arithmetic on Alphabet’s release.
As we read the filings, advertising’s share of the added revenue fell: in the second quarter advertising revenue rose $109.0 million, about 43% of that quarter’s gain, by our arithmetic on the 10-Q, and in the third it rose about $56 million, about 26%.
As we read the supplemental table, North America revenue grew on ARPU, not on users: daily users there fell to 92 million from 98 million while North America ARPU rose 20% to $11.07.
Doug Hott, Snap CFO, investor letter, 4 Nov 2026
“as we have been able to increase our investments in AI and ML without increasing our overall infrastructure costs”
Three Implications
FOR THE AD BUSINESS Snap says advertising revenue grew 4%, while its letter says upper funnel brand advertising declined year-over-year.
FOR COSTS Full-year Infrastructure Costs guidance is $1.65 billion to $1.66 billion, against $1.65 billion to $1.70 billion before; the top of the range is $40 million lower, by our arithmetic.
FOR THE SCORECARD From its first-quarter 2027 report Snap plans to make global MAU its primary audience metric and stop reporting regional DAU and regional ARPU.
The framework says: “Inference is a revenue engine: continuous, distributed across millions of applications and agents, incurring marginal cost with every query.”
As we read it, Snap’s letter reports the cost side of that engine for one consumer app: it says it raised AI and ML investment without raising overall infrastructure costs, and it lowered the top of its full-year Infrastructure Costs range by $40 million, by our arithmetic. The framework does not discuss Snap.
Snap’s release and letter give advertising growth as a percentage only. Our advertising and Other revenue figures for the quarter are derived from the stated 84% and the 2025 10-Q, so they are approximate, and the third-quarter 10-Q will give the exact split. The documents give no Specs price, unit or revenue figure, and we found no mention of My AI in them. We did not hear the earnings call.
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Snap added $215.6 million of quarterly revenue from a year earlier, and about $56 million of it, about a quarter, came from advertising, by our arithmetic; Other Revenue, led by subscriptions, added about $159 million. Snap says it raised AI and ML investment without raising overall infrastructure costs, and it plans to replace DAU with MAU as its main audience metric from the first quarter of 2027.
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A note on sourcing. Figures and quotations are from Snap’s third-quarter 2026 results release and investor letter (Form 8-K, Exhibits 99.1 and 99.2), filed with the SEC on 4 November 2026, and its Forms 10-Q for the third quarter of 2025 and the second quarter of 2026. Consensus figures are as cited by Wall St Engine. The advertising and Other revenue split for the quarter, changes, shares and index values are our arithmetic; the split is derived from Snap’s stated 84% growth and is approximate.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
