Q2 2025 Snap Inc Earnings Call
Good afternoon everyone and welcome to snap inks. Second quarter 2025 earnings conference call. At this time, participants are in a listen-only mode. I would like to turn the call over to David meter head of investor relations.
Thank you and good afternoon, everyone.
Welcome to snap's, second quarter 2025 earnings conference call.
With us today are Evan Spiegel, Chief Executive Officer and Co-Founder, and Derek Andersen, Chief Financial Officer.
Please refer to our investor relations website at investor.net. Calm to find today's press release, earnings slides, and investor letter.
this conference call includes forward-looking statements which are based on our assumptions as of today,
actual results May differ materially from those expressed in these forward-looking statements and may make no obligation to update our disclosures.
For more information about factors that may cause actual results to differ materially from these forward-looking statements, please refer to the press release. We issued today as well as risks described in our most recent form 10K or form 10q. Particularly in the section, titled risk factors.
Today's call will include both gaap and non-gaap measures.
Reconciliations between the 2 can be found in today's press release.
Please note that when we discuss all of our expense figures, they will exclude stock-based compensation and related payroll taxes as well as depreciation and amortization and certain other items.
Please refer to our filings with the SEC to understand how we calculate any of the metrics discussed on today's call.
With that. I'd like to turn the call over to Evan.
Hi everybody and welcome to our call in Q2. We made exciting progress on our long-term strategy to grow our community, enhanced value for advertisers, and invest in the future of augmented reality.
Enriching relationships between friends and family is Central to our mission and we continue to build products that bring people together and Spark conversations among snapchatters from messaging and maps to personalized content and our experiences.
Our teams continuous innovation was evident as we reached 932 million monthly active users in Q2 an increase of 64 million, or 7% year-over-year. Moving us closer to our goal of serving 1 billion snapchatters around the world.
This authentic communication and self-expression is a key differentiator in the crowded digital landscape, because it empowers Brands to build strong relationships with their audience.
Revenue increased 9% year-over-year to reach 1.34 billion dollars in Q2.
Driven primarily by the continued growth of our small and medium customers and delivery against lower funnel objectives.
Snapchat+ approached 16 million subscribers in Q2 and was the primary driver of Other Revenue growing 64% year-over-year to reach an annualized run rate of nearly $700 million.
To build on this momentum, we introduced lens plus a new Snapchat Plus subscription to your that offers access to exclusive new AI video lenses. Emoji game lenses as well as Early Access to new features.
We continue to focus on aligning our investments, with our core strategic priorities, while improving financial performance.
Writing consistent and meaningful. Free cash flow.
We ended the quarter with 2.9 billion dollars in cash and marketable securities. Providing Financial flexibility to invest in our future.
We have made a long-term and consistent investment in augmented reality committing more than 3 billion dollars over the past 11 years, to develop the world's only full stack vertically, integrated augmented reality platform.
With 1 of the world's largest, our developer communities, purpose-built developer tools, a proprietary, rendering engine, our own highly optimized operating system. Our own Optical engine, as well as the design of the hardware itself. Our tight control over each aspect of the hardware and software allows us to deliver a product experience. That is unmatched.
We're excited about our progress, as we work to make specs available to the public in 2026.
While we are moving quickly to realize the full potential of our business, we believe there is an opportunity to better, align snap's, engineering, and Technology Investments with our business priorities.
We will be Distributing our engineering teams to directly support our business functions with our core applications team reporting to Bobby Murphy co-founder and chief technology officer and our monetization engineering team reporting to a Jeep Moen. Our chief business officer
Our Chief Information officer and chief information. Security officer will report to me and Lead Enterprise wide foundational infrastructure and platform integrity.
This new distributed structure will Empower our teams to take greater ownership and Thrive continued Innovation for our community and advertising partners.
We are grateful to Eric, Young SCP of engineering for his contributions, and wish him all the best as he departs to pursue a new opportunity.
Snapping with friends and families at the core of our service, driving daily engagement and long-term retention.
In Q2, we introduced several features to make communication faster easier, and more fun.
We launched the Snapchat app on Apple Watch, allowing Snapchatters to preview incoming messages and respond using the keyboard, scribble, dictation, or emojis.
Leveraging. Our investments in Ai and machine learning, we enhance group suggestions to help people connect more easily with their closest friends.
Our video chat feature continues to strengthen real connections with Snapchat or spending 30% More Time video chatting year-over-year in Q2.
These updates highlight our ongoing commitment to enriching the Snapchat experience through visual communication and fostering deeper connections amongst our community.
Global time spent watching content and the number of content viewers increased year-over-year in Q2 reflecting the multi-year investment in our machine learning infrastructure and the continued growth in spotlight.
In Q2, we began testing our largest mixed feed model to date which reduced training Time by half and led to an increase in content view time growth.
These strategic Investments and improvements have been fundamental in Spotlight, reaching an average of more than 550 million monthly active users.
Time spent on Spotlight, grew 23% year-over-year in Q2 and now contributes to more than 40% of total time spent watching content.
In Q2, we introduced a suite of new tools and features that make it easier for SNAP stars to create and share content.
Creators can now generate videos from their saved memories using templates and they have access to new insights like returning. Viewers top content and total view time which will enable creators to optimize their content to deepen their relationship with their audience and receive rewards for posting.
Over the past year, we onboarded thousands of creators to our Snapstar program, driving strong momentum with the number of Spotlight posts by Snap Stars growing more than 145% year-over-year in North America in Q2.
As part of our efforts to strengthen real-world connections among close friends, we acquired Saturn, a social calendar app that helps high school and college students manage and share their class schedules.
Saturn transforms calendaring by orienting it around friends, to make time management, feel intuitive and fun.
Students from over 80% of us, high schools, use Saturn with their friends to organize their day.
We are excited to support Saturn's growth and explore ways to indicate. Its calendaring expertise into Snapchat and new and innovative ways.
Augmented reality continues to empower creativity in driving engagement on Snapchat, Snapchat. Snapchat is use our lenses in our camera, more than 8 billion times each day and over 400,000 creators from nearly every country have built more than 4 million lenses using our industry-leading, our tools.
In Q2 more than 350 million snapchatters, engage with our every day on average.
Our 90s School photos, AI lens, different eras, AI lens, and Cartoon World. AI lens were collectively viewed over. 1 billion times in Q2 highlighting strong engagement with our latest, our experiences powered by generative AI.
Has helped foster a global community of professional developers by giving them powerful tools to create innovative user experiences.
We have made our creation increasingly more accessible with easy lens and AI tool that empowers lens creators to build a lens in just minutes by typing out a prompt to the lens that they want to create.
In Q2, we expanded access with the introduction of the lens Studio IOS app and a new web-based lens Studio creation, tool at Lens. Studio.net snapchat.com,
While the desktop version of lens, Studio Remains the primary tool for professional developers creating Advanced and more sophisticated, our experiences across Snapchat, partner, apps and spectacles. These new tools are designed to help more people at all. Skill levels, get started with our
To support creators building lens games. Our latest lens Studio update includes new features that simplify development.
These include the new Bitmoji suite for enhanced personalization and animation that makes it easier to bring 3D Bitmoji avatars to any game environment. Along with new game assets including leaderboards and multiplayer features built specifically for Snapchat.
As a result games engagement on Snapchat has continued to grow now reaching more than 175 million monthly active, users up over 40% year-over-year.
We Believe games represent a compelling long-term opportunity for driving engagement on Snapchat, and eventually new monetization opportunities for creators and our business.
In Q2, we announced plans to publicly launched. Our first fully Standalone lightweight specs are glasses in 2026, marking an exciting milestone for our company and a critical step toward realizing our long-term vision for augmented reality.
Snap is uniquely positioned as the only company in the world. With a fully integrated, our Computing stack our upcoming specs, represent a Leap Forward in human-centered Computing. It will be significantly smaller lighter and more capable than our fifth generation spectacles released to developers in 2024.
By combining Advanced machine learning and AI. With spatial intelligence specs will enable users to interact with Computing and fundamentally new ways, delivering digital experiences embedded directly into the world around us.
Our developer Community continues to build new and compelling use cases and creative lenses for specs.
Recently, launched lenses for specs include gois, super travel for Real Time, translation and currency conversion. Paradiddles drum kit for interactive, Music Learning over laid on a physical drum set and an ark's pool assist to help players, make better shots while playing pool.
These examples demonstrate, how specs seamlessly integrate Computing experiences into 3? Dimensional space, enabling practical utilities enriching, educational experiences and fostering imaginative new forms of entertainment.
To build on this momentum. We introduced updates to snap OS and new tools to unlock deeper our capabilities. AI powered experiences with open Ai and Gemini on Google cloud. In addition to hosted open source models. Now enable the creation of sophisticated multimodal, AI powered lenses,
Additionally, our new automated speech recognition API supports real-time transcriptions across dozens of languages and the snap 3D API. Empowers developers to generate 3D objects on the fly from any prompt.
Future enhancements, including a new partnership with Niantic Spatial to develop a shared AI-powered map of the world, and our recently announced WebXR support, will further expand the utility and accessibility of our platform. This will help our developer community build more unique, industry-leading experiences in advance of the public launch of Spectacles next year.
We have made significant progress across our advertising platform by focusing on 3. Core priorities advancing our Ai and ml capabilities with privacy safe signals. Optimizing ad formats and tools for performance and improving our go-to Market strategy with a strong focus on smbs.
In Q2, we further enhanced, our Ai and ml capabilities leading to meaningful improvements in ad, platform performance, particularly in conversion attribution, real-time personalization and product relevance.
This contributed to 70 purchase volume increasing 39% year-over-year for Commerce. Advertisers and total purchase related ad Revenue growing more than 25% year-over-year in Q2.
We continue to innovate on our ad offerings. And in June, we expanded sponsored snaps in the US and several other regions globally, activating, all pixel and app, Dr. Objectives, we also introduced first snap a single day takeover format. That delivers the first sponsored snap in the chat inbox.
Sponsored snaps enable advertisers to show up like a Snapchat or helping them build authentic relationships with our community.
Sponsored Snaps are proving highly effective and driving incremental conversions. Delivering up to a 22% increase when included in an advertiser's broader snap campaign. Mix,
Advertising business and an opportunity to reach our unique audience directly and natively within our highest engagement surface. The chat inbox.
In the near term. This is delivering Roi for advertisers in the form of incremental reach and additional conversions. That we believe will translate into incremental Topline growth over time as we build demand and continue to enhance the performance of this new product.
We continue to make meaningful progress in app direct response. Performance. Notably sponsored Snaps are now driving. An 18% lift in unique converters of app, installs and app purchases, we recently began testing app and cards. That reinforce Advertiser messaging and guide users to a conversion at the end of The Snap app and are delivering a 19% average boost in scan installs.
In addition we have delivered core ml improvements and introduce Smarter Tools like Target cost bidding to deliver performance and scale while remaining within an advertiser's cost constraints.
Our investment in automation continues with the launch of Snapchat smart campaign, Solutions, an AI, powered Suite, designed to enhance campaign performance and simplify Advertiser workflows.
This Suite includes smart bidding which dynamically adjust bids to achieve a desired cost per action.
for example, I can I will a leading European sportswear brand, saw their roaz double and conversion volume increased by 80% while reducing their cost per action by 50% after implementing smart bidding,
We also encouraged by initial testing of smart budget, which automatically adjusts campaign budgets across assets and the Alpha Testing of Auto targeting which leverages AI to identify and reach high value users.
We continue to enhance our go to market operations in Q2 with particular, focus on better serving our growing community of SMB advertising partners.
Smbs were the largest contributor to add Revenue growth in Q2 driven by a combination of more performant. Dr. Products improved go to market operations and a simplified ad buying experience
For example, wisby money an online Financial Services tool in France. Leverage smart bidding on Snapchat to significantly lower their cost. Per acquisition, resulting in a 77% Improvement. In ecpm and a 69% Improvement. In cost per click making Snapchat, 1 of their top performing acquisition channels.
Looking ahead, we see significant opportunities to further enhance return on Advertising spend by deepening our investments in Ai and machine learning delivering Innovative ad formats across the entire funnel and enhancing the tools and insights that help our advertising Partners, optimize their campaigns. These ongoing efforts are aimed at ensuring Snapchat remains at high performing and increasingly automated platform for all of our advertising partners.
With that, I'd like to turn it over to Derek to share more about our financial progress.
Thanks Evan. We continue to drive robust growth in our Global community. In Q2 with Dau, reaching 469 million, an increase of 37 million or 9% year-over-year, including 98 million Dau in North America,
100 million in Europe and 271 million in the rest of the world.
North America Mao was 1, 159 million in Q2 and flat on a year-over-year basis. While North America unique snap senders grew 2% year-over-year which is an important input to long-term retention
As our Global Community continues to grow, we have continued to scale. Our Top Line with total revenue, reaching 1.345 billion in Q2 up 9% year-over-year.
Rate of Topline growth was impacted by a number of factors in Q2 including an issue related to our ad platform, the timing of Ramadan and the effects of the diminished changes.
Unfortunately in our efforts to improve Advertiser performance, we shipped a change that caused some campaigns to clear the auction at substantially reduced prices.
We have since reverted this change and advertising Revenue, growth has improved as advertisers adjust their bid strategies to achieve their objectives.
Despite these headwinds advertising Revenue reached 1.174 billion in Q2 up 4%, year-over-year, driven primarily by growth from Dr. Advertising Revenue, which increased 5% year-over-year,
Growth the growth in Dr. Revenue was driven by strong demand for our pixel purchase and app, purchase optimizations as well as continued strength from the SMB client segments.
As we continue to build demand across these new drivers of impression growth, we anticipate that they will be increasingly accretive to Topline growth over time.
Sponsored snaps remain, a large incremental, Revenue opportunity, as they appear on the most frequently used surface in Snapchat while we have implemented strict frequency caps to responsibly manage. The rollout for our community. Sponsored Snaps are contributing to meaningful impression growth and incremental reach in our most highly monetized markets thus far in Q3
This increased Supply is initially reduced auction, contestation and lowered, platform wide ecms.
We expect that these Impressions will lead to improved performance for advertisers that will help to build incremental demand and make sponsored snaps increasingly accretive to Topline growth over time.
Other Revenue increased. 64% year-over-year to reach 171 million in Q2 with the largest driver, being Snapchat, Plus subscribers approaching 16 million in Q2, an increase of 42% year-over-year.
To build on the momentum, we are seeing in our subscription products, we introduced lens Plus in Q2, which is a new Snapchat Plus subscription tier offering access to new and exclusive lenses.
Adjusted cost of Revenue was 650 million in Q2 up 11% year-over-year.
Inflation were the largest driver of the year-over-year increase due in large part to our investments in ml, and AI models to drive improved, Advertiser performance and content personalization, as well as the continued strong growth in our Global community.
Infrastructure costs per Dau was 84 cents in Q2 and within our full year. Guidance range of 82 to 87 cents.
The remaining components of adjusted cost of Revenue were 257 million in Q2 or 19% of Revenue, which is in line with the prior quarter and within our full year, cost structure. Guidance range of 19 to 20%
Adjusted operating expenses were $654 million in Q2, up 10% year-over-year. Personnel costs increased 10% year-over-year, driven by a 10% year-over-year increase in full-time headcount, with hiring focused on our core strategic priorities, including improvements to our ad platform and advertising performance. Our efforts to drive more personalized and fresh content and the drive to expand our leadership in our.
Higher legal costs, including litigation and regulatory compliance-related costs, were an additional driver of cost growth in Q2.
Adjusted Evita was $41 million in Q2 compared to $55 million in Q2 of the prior year. Net loss was $263 million in Q2 compared to a net loss of $249 million in Q2 of the prior year.
The 14 million IR, net loss year-over-year, largely reflects the flow through of a 14 million decline in adjusted. Eva, A 222 million increase in interest expense offset by a 16 million Improvement associated with the early retirement of convertible notes in Q2 of last year.
Free cash flow was 24 million in Q2. While operating cash flow was 88 million over the trailing. 12 months, free cash flow was 392 million and operating cash. Flow was 587 million, as we continue to balance Investments with Topline growth to deliver sustained positive, cash flow.
Dilution or the year-over-year growth in our share count was 1.6% in Q2.
As part of our efforts to responsibly manage the impact of SBC on our share count, we repurchased 30 million shares at a cost of $243 million in Q2.
We ended Q2 with 2.9 billion in cash and marketable, securities on hand.
we believe that our robust free cash flow generation and the strength of our balance sheet ensure that our business has the capital and financial flexibility to invest in our core strategic priorities to drive long-term growth
As we enter Q3, we anticipate continued growth of our Global community. And as a result, our Q3 guidance is built on the assumption that Dau will be approximately 400776 million in Q3.
Our Q3 guidance range for revenue is 1.475 billion to 1.555 billion.
3 as we continue to prioritize investments in ml and AI infrastructure to drive improvements in our ad platform and depth of content engagement.
For all other costs of Revenue. We maintain our full year cost guidance at 19 to 20% of Revenue and anticipate, we will be within this range in Q3.
For adjusted operating expenses. We are maintaining our range of 2.65 to 2.7 billion.
For stock-based compensation, we are lowering our full-year cost guidance from the prior range of $1.13 billion to $1.16 billion.
to a new range of 1.1 billion to 1.13 billion which implies a 30 million reduction at the midpoint
Given our updated full year cost guidance, and our investment plans for Q3, we estimate that adjusted, Evita will be between 110 million and 135 million in Q3.
Moving forward, we will remain focused on executing against our strategic priorities of growing our community and improving depth of Engagement driving Topline Revenue growth and diversifying our Revenue sources and building towards our long-term vision for augmented reality.
Thank you for joining our call today, and we will now take your questions.
Thank you. We will now begin the question.
To ask a question.
Tone phone. If you are using a speaker-phone please pick up your handset before pressing the keys to withdraw your question. Please press star. Then 2 in the interest of time we ask that you please limit yourself to 1 question. After your initial question is asked your line, will be muted. At this time, we will pause momentarily to assemble our roster.
The first question comes from Ross, Sandler with Barkley's, you may proceed.
Hi guys. Just uh 1 question. I want a housekeeping. Uh, question. Like I said it's 2 total um
So you sound pretty optimistic about what you're seeing early on with sponsored snaps. Uh, we know that's a big opportunity given uh how much traffic that surface sees within the app. So, you know, could you talk about what you saw in 2q? And, and the longer term vision for, for this new ad unit, and then the housekeeping question is on the, um,
Auction pricing issue in the quarter could use elaborate on on what, what happened there. And what had what would have ADD Revenue? Grown had had that not happened. Thanks a lot.
Hey Ross, thanks so much. Uh, for the question uh the roll out of sponsored snaps is definitely a very meaningful and profound evolution of our ad, uh, business, you know, because sponsored snaps really bring a native and highly performant ad placement to the most frequently used surface and Snapchat. So, you know, so far sponsored snaps have driven meaningful growth in both incremental, reach and conversions for advertisers who utilize the placement. And we've been seeing some really great engagement from users as well. So you know after opening a sponsored snap from the chat feed users exhibit. Significantly higher engagement per full screen ad view driving a 2 times. Increase in conversions. A 5x increase in Click to convert ratios and a 2X increase in website dwell times compared to other inventories. So I think the early signs are are very positive. Of course, this is a profound shift in terms of available inventory on the service. So we've tried to be really thoughtful about managing the supply growth, uh, you know, with things like frequency, caps and relevancy filters. As we work to build more demand,
And against uh, this new inventory, I'll uh I'll let Derek speak to the sort of Revenue pacing throughout the quarter.
Work of reverting the ad uh platform change but also the factor around Ramadan obviously being diminished during that period of time. Um, so we saw the recovery as we went through. May that really gave us the confidence. Um
You know, to be able to roll out sponsored snaps more, broadly, both from a regional and a bidding objective perspective as we moved into June. And so that's where we've seen, you know, a little bit of the, the impact of all of this, uh, inventory that Evan just spoke about, um, and how that's translated into, you know, lower platform, YDC PMs and some of, you know, obviously improved pricing for our advertisers where a lot of that benefit is occurring at the moment. So the big focus at this point is is building demand. You know, we have seen you know, post the roll back um of the ad change as we move through June and into July, we've seen ad Revenue specifically growing at a rate between 3 to 4 percent. So it'll give you a sense of how the topography sort of moved from 9 and q1 to approximately 1% for ad revenue and April then to a rate of, you know, recovering largely in May and then we're looking at 3 to 4 post of roll back that change. So hopefully that gives you a better sense of how things have evolved as we've moved through these different factors.
And we're excited. Now, about ramping the demand into these new ad units, and the performance, that we're delivering for a Partners, uh, with this new inventory. Hopefully that's helpful. Thank you.
Thank you. The next question comes from Rich Greenville with live shed Partners. You may proceed
Hi. Thanks. You know, I guess. Um,
Just to sort of play off on. Let me just do a housekeeping. First, you you obviously just were talking about a lot of the factors that hit Dr. Derek in that last answer. Um, could you give us a sense of what brand looks like? Obviously, I assume most of the impact that we saw on the bidding related to Dr. In that drop from mid- teens to like 5% this quarter, if you could, just give us a sense of like, what's happening with brand advertising? Um, because I don't think you, um, disclose that this quarter versus the past,
And then maybe just a big picture question for Evan.
I think watching you Evan you know you've spoken on a bunch of podcasts, you've been um done a bunch of interviews in the last several months. You clearly have a a a true passion for what you're building in our and specs which are going to roll out next year. If you could just maybe spend a minute. We've obviously heard um both meta and Google talk about their sort of plans for our and glasses in the last several weeks.
Hi. This is snaps approach. Fundamentally differ and then the the piece of that is do you have the capital to pursue the vision on your own? Or do you need Partners to bring this to fruition As you move forward? Thanks so much for taking the questions.
Hey Rich, thanks for the questions, I'll take the first 1. So yeah, correct, uh, the majority of the deceleration quarter of a quarter showed up in the Dr. Advertising Revenue. So we saw total ad Revenue in Q2 was at 4% year-over-year. We saw the Dr, ad Revenue up, 5% year-over-year as you had mentioned and, uh, brand advertising Revenue was flat in Q2, uh, so that slight improvement over the growth rate in the prior quarter. So hopefully that gives you a little bit of the sense of the Topography of the revenue between the different splits there of Dr in brand. And and obviously, in terms of the auction, you know, impact issue. Yeah, that occurred largely to the Dr. Advertising uh, line. So hopefully that provides a little more context.
Thanks Rich. Uh, for the question. Yeah, we're we're incredibly passionate about the opportunity to reinvent, uh, the computer. People are spending more than 7 hours a day now on average staring down at screens. And I think even just moving a couple hours of that, uh, to look and out at the world through, you know, see through lenses, and a pair of glasses can make a meaningful difference for people's, uh, well-being. But also, the way they interact with Computing and, and AI, uh, in general. So, the opportunities enormously this is
Thing developer Community. I think is a real Advantage for us. Uh, you know, as we uh, you know, prepare for this launch. Uh, next year I think, you know, as a as it pertains to sort of the capital uh requirements. I guess what, over the last trailing, 12 months, we've generated close to 400 million dollars in in free cash flow while investing in our long-term Vision, uh, for specs and and really Reinventing Computing. Uh, so I think from a capital, uh, perspective, you know our our own cash flow generation. Obviously, the core Snapchat business, generates a lot of cash. Uh, we've been able to to reinvest that. And I think that, you know, that's probably the lowest cost of capital. We, we have, uh, but you know, from a partnership perspective I think there's a real opportunity to work with Partners to bring specs to Market. Um, and so, so that'll be a big Focus for us. Uh, obviously in the lead-up to the launch. Thanks,
thank you.
The Following comes from March mullik with Bernstein, you may proceed.
Uh yes uh thanks for taking the questions. Um I appreciate the color around how you know time spent with content is growing. Uh any color you can share on how kind of time spent with like snapping with friends and family has been tracking perhaps particularly in the US where I think users declined by about a million um and then secondly Snapchat. Plus growth continues to track real. Well, I think it's mid teens Revenue contribution here. Uh, so I think we're now, like, 3 years into this product and just wondering how you're thinking has kind of evolved around, you know, how meaningful this business is.
Can be going forward. Thank you.
Yeah. Thank thanks, Mark. Uh, you know, certainly we're excited about the growth, you know, for example and things like, uh, calling. We talked a bit about that or, uh, you know, earlier in the call I think we've seen calling growth with friends and family growth, something like 30%, uh, year-over-year which is has been really encouraging and North America. In particular snaps, send unique users, uh grew by 10%, sorry, 2%, uh, year-over-year and North America. Mao was flat year-over-year at 159 million. So we did see a slight decline, uh, in active days, our Focus, you know, on on driving daily engagement is really around supporting communication between friends and family. Uh, you know, and, and of course, continuing to improve the, the content experience, uh, as well. We've got some new products Landing later this year. So we're excited about that the teams, uh, heads down, uh, focusing on getting that out the door, um, in in terms of, uh, other revenue or direct Revenue, uh, business, the the growth is is really uh, continued nicely. I mean, we we achieved a 700.
Million dollar annual run rate, growing 64% year-over-year, so that that Revenue has become a much more meaningful to the business and we see a lot of opportunity to to continue to develop uh, the Snapchat Plus product, but also new products, like lens plus, and, and potentially in some new offerings around, uh, creators on Snapchat as well. So, um, I think it's just a testament to the Deep engagement, uh, you know, people have with with Snapchat and, and certainly our ability to continue to deliver new value.
That are willing to pay for. So it's been a really exciting area of growth in the business, and I'm looking forward to investing more there.
Thank you. The next question comes from Mark, mahaney with evercore. You may proceed.
Okay, 2 questions please. Uh you talked about that Derek at the end. Um stock-based comp compensation coming down, you just any caller on the, why is it just a new approach to how you're thinking about, uh, stock-based compensation as an expense item and then, secondly, going back to I know you've got a lot of interesting news um uh monetization and sponsored snaps, but going back to just the core Spotlight. Uh, not the core but the spotlight monetization, where are you on that? How do you feel about the progression of that? Maybe not just in the quarter but you know, uh you know for the next year or 2, the your level of confidence in where you are in terms of load level of targeting monetization Advertiser interest. Thank you very much.
Uh, hey there Mark, it's Derek speaking on the SBC side. Yeah. The note there is, uh, we took down the full year of cost structure guidance for SBC at the midpoint of that range for the full year, about $30 million lower than we'd been in the prior quarter. That's the second reduction we've made to that estimate for the full year this year. So, we're trying to be very careful and focused in our hiring, trying to make sure that our hiring is laser-focused on our core strategic priorities. Um, and so, as we've been able to manage that ramp and balance out,
The level of investment in the business relative to our observed growth and Topline to make sure that we're doing well. You know, on profitability and progress towards profitability over time, that balance is really showing up there. So uh thanks for noticing that and and we'll keep updating folks, each quarter as we make progress there.
Who has become an increasing share of Revenue overall and that's been uh, really exciting to see. We're we're doing some experiments around sort of more contextual, uh, placements, which were excited about and, and going to continue to explore, uh, further. But overall, uh, you know, that, that inventory tends to perform quite well, I think, uh, you know, the the dwell times and sort of high consideration, um, of that inventory is is helpful for direct response. Uh, Advertiser. So, you know, we're, we're also iterating on formats, but yeah, generally, um, you know, excited to see that the the progress on Spotlight monetization and now that, you know, Spotlight total time spent is about 40% of time. Spent overall, uh, just becoming a more a more meaningful part of the business.
Thank you.
The next question comes from Justin Post with Bank of America. You may proceed.
Great, thanks. Um, just wondering if maybe you could outline some initiatives to, to that you're really excited about to kind of maybe re-accelerate, USDA use. And then second on the guidance, it it kind of implies similar growth despite the challenges uh, in Q2. Um how are you thinking about, you know, the ad revenues of in there and, and do you see opportunity for, you know, acceleration as especially sponsored snaps gets gets more implemented. Thank you.
And in terms of uh North America user engagement. I I think you know, 1 of the the biggest shift shifts has really been, you know, from posting stories for friends to sharing content, you know that you find and and Spotlight or or stories and and sending that to your friends to start a conversation. So historically people would start conversations by replying to a friend story that obviously still happens quite, uh, frequently today. But we've also seen the rise in content sharing is really a conversation starter and catalyst. So what, you know, on the Innovation front, we've been thinking a lot about new parts of the, the service that can help sort of inspire or Kickstart uh, conversations. And, you know, as we think about Innovation and Landing some new products later in the year, uh, that that will really be a focus area.
Hey, and just in terms of, you know, what we're seeing in terms of opportunity for growth in Q3 you likely heard me say earlier that, you know, since we've rolled back the ad platform issue, we're seeing ad Revenue growth in this sort of 3 to 4% range. So, you know, that that correlates pretty closely to the guidance range that we're seeing for Q3 on total revenue, maybe at room for a point of improvement, as we move to the quarter. Um, the big thing we see there are obviously, is you know, number 1, continuing the momentum. We're seeing in direct monetization and other Revenue. But also you know, the work that we're going to be doing to build demand and to sponsored snaps. Um, the 1 thing, I'll note there is too just comps as we move through the quarter they're obviously some big items last year with
With Olympics and so on. So we're going to be working to overcome that too. And so the teams will be working hard to build demand into this new inventory and make sure that we power through those things as we go through the quarter. So largely reflective of the rate of growth that we're seeing today. Maybe a little bit of improvement as we move to the quarter and execute, uh, hopefully that gives better context.
Thank you.
The following question comes from Eric Sheridan with Goldman Sachs, you may proceed.
Thanks so much for taking the question, maybe building on on Rich's question earlier, that was sort of anchored around spectacles and and are and where you're going longer term. And I'd love to broaden out the question and, and talk a little bit more about the wider ecosystem. When you think about how user interfaces might evolve from the current formatting to where you want to take them, over the medium to long term, and how you think about the role of content and AI at the center of some of those experiences, they move more towards spectacles and how much of those Dynamics around content, or AI you feel? You need to own operate and build yourself rather than possibly build in partners and, and other ways to possibly scale those initiatives. Thanks so much.
I think as we look forward to, you know, the types of experiences people will be able to have with our glasses. I think we're quickly moving uh to a world where those sorts of experiences can be generated, uh, on the Fly. And again, that's an opportunity where we think we can really differentiate, especially because, uh, we have developed the, the developer tools ourselves, and supported this developer, uh, ecosystem developers, can actually, um, you know, plug into to, uh, these these very various, um, uh, lens Studio tools as well, um, and and design their own plugins. Uh, so I, I think, um, just just looking towards the, the future here, we're going to invest where we can differentiate, uh, of course, having um, you know, the, the glasses form factor allows you to provide much more contextually relevant Computing experiences to understand, not only, uh, you know, what's on the the screen or the lens per se, but also the world uh around you. And and and we think that that we can really build a competitive Advantage there over time.
Thank you. The next question comes from Dan. Salmon, with new Street research. You may proceed.
Great. Good afternoon, everyone. Um, Evan, could you take us a little deeper on your small and medium customer base? Uh, maybe any color on the growth of the SMC count or broader total Advertiser growth you can add
Uh, and it sounds like smart bidding has been a boost for smc's. Uh, what, what other AD products are you seeing get the most traction with that group and any
Insights on your roadmap for, uh, them from here. Would be great. Thanks.
Yeah, we're we're really excited about the progress with SMC segment. You know, this is the largest contributor to add Revenue growth, uh, in Q2. And I think, uh, you know, our improved go to market operations and the simplification of some, of our our ad products. And AD manager have have been really helpful there. Uh, you know, when it comes to the, the smart, uh, smart solutions for, for advertisers, obviously, budget optimization. Um, you know, has been in testing and is, and has driven some really strong, uh, results and then Auto targeting as well. Uh, we're finding that AI can can really assist advertisers with finding the right, uh, audience to convert, um, you know, on their on their, uh, products and lower funnel goals. So, uh, certainly excited about a lot of the, the, the automation, uh, improvements there. And, and that's especially important for smaller, uh, you know, advertisers who may not necessarily have the resources to manage, uh, campaigns in such a fine grain, uh, way. So I think automation will will provide a big lift for us and sees, but but, you know, advertisers more, uh, more broadly as well.
Thank you.
Our last question comes from Benjamin black with Deutsche Bank, you may proceed.
Great. Um, thank you for taking my question. I just have 1 on, um, on on lens plus really, um, you know, it'd be great if you could sort of talk a little bit about the reception, um, maybe, you know, give us any sort of idea as to how conversion metrics or engagement Trends are being or or sort of, you know, panning out in the early Innings, you know, how big of an opportunity, do you think you could ultimately be and, and perhaps more broadly, you know, how do you think about the interplay between pricing and and subscriptions to drive growth, um, within um, within Snapchat Plus? Thank you.
Yeah, thanks so much for the question. It's really early with lens plus, but we're super excited about it. Obviously, lenses are are really heavily engaged with, on Snapchat, with people, you know, using lenses, um, when 8 billion times every day. So I do think the opportunity to offer exclusive lenses. And, of course, um, you know, or or AI lenses, which have proven incredibly popular, uh, will be, you know, a strong driver of growth with lens plus. So I think there's a nice top of funnel there, uh, for sure. Um, you know, looking more broadly at pricing, we think there's room to experiment on pricing. I think our our primary focus so far has just been on continuing to build the value proposition for customers. Uh, you know, and we see obviously new features being a, a, a, a major driver for
Uh, subscriber acquisition, um, and retention as well. So, uh, you know, it's it's a small But Mighty, uh, team. And I think over time especially given the size of the revenue opportunity in front of us. We'll be investing more um, in you know, pricing experiments. But but I'd say, you know, the primary focus for us is just continuing to build value for our subscribers and our community.
This concludes our question-and-answer session as well as Snap Inc.'s second quarter 2025 earnings conference call. Thank you for attending today's session. You may now disconnect.