For the first time in its 11-year corporate history, the company behind Snapchat had a quarterly profit.
For the last two years, the company was making money on an “adjusted EBITDA” basis, a creative accounting measure that can remove select costs from the earnings equation. But in the fourth quarter of 2021, Snap turned a profit using GAAP measures, or Generally Accepted Accounting Principles. Snap earned $23 million in the quarter, compared with a loss of $113 million in the fourth quarter of 2020.
Snap’s quarterly revenue, meanwhile, grew 42% year over year to $1.3 billion.
A wild week for tech stocks
The news came amid a tumultuous week for social media stocks. Meta’s stock fell 25% on Feb. 3., erasing $237 billion worth of value, after the company announced that Facebook lost daily users for the first quarter in its history. Meta CEO Mark Zuckerberg pointed to the Chinese-owned app TikTok as its main competition.
Meta’s news sunk the entire category of social media stocks: Twitter, Pinterest, and Google (which owns YouTube) all fell in regular trading hours on Feb. 3 before rebounding after hours. But Snap’s day was the most erratic. Its stock fell 24% during the regular session; after the bell, when the earnings were disclosed, the shares jumped 56% to $38.
Sidestepping the TikTok effect
Unlike Facebook, daily users on Snap increased, by 24% from the year-ago quarter to 319 million.
“Snapchat is clearly not as prone to the ‘TikTok effect’ as Meta,” said Insider Intelligence principal analyst Jasmine Enberg, who noted much of the app’s growth came from India, where TikTok is currently banned.