Snap Inc.’s revenue surged in the latest quarter, as the company attracted more users to Snapchat as well as advertisers looking to reach people spending more time online and on mobile devices as a result of the coronavirus pandemic.

Quarterly revenue rose 52% to $678.7 million, well ahead of analysts’ estimates of $557 million, according to a FactSet poll. Many advertisers resumed or increased their marketing budgets during the quarter, the company said, as businesses redirected money to self-serve advertising, a faster way of launching a campaign while reducing costs.

Snapchat added 11 million users from the prior quarter to end the September period with 249 million daily active users. The user growth was stronger than analysts had forecast and showed that the platform benefited from strong engagement even with the emergence of TikTok and strong results earlier this year from Facebook Inc.’s networks. Snap said it continues to see strong engagement among Gen Z and millennial users in the U.S., the U.K. and France.

“Our focus on delivering value for our community and advertising partners is yielding positive results during this challenging time. We’re excited about the growth of our business in Q3 as we continue to make long-term investments in our future,” Snap CEO Evan Spiegel said in a statement Tuesday. “The adoption of augmented reality is happening faster than we had previously anticipated, and we are working together as a team to execute on the many opportunities in front of us.

Businesses have been more open to experimenting with augmented reality to drive sales because stores aren’t as widely accessible anymore because of the pandemic, Spiegel added during a conference call with analysts.

Snap has fueled the popularity of augmented reality with camera filters that let users transform into an anime character, change their hair color, or incorporate effects into their selfies. It has also been releasing features that let users add AR effects to local buildings and landmarks. One effect, for example, makes it seem like the Capitol building is shooting confetti. A feature called City Painter that was released in London lets users create virtual art around the city.

Snap is among the first advertising-dependent companies to post results from the most recent period, and its momentum could bode well for tech titans ahead of an extended holiday-shopping season. The final quarter of the year is typically the strongest for Snap, and executives said if current conditions continue, revenue could rise between 47% and 50% from last year.

Chief Executive Evan Spiegel said that he was pleased with the company’s growth in the period and that it will continue long-term investments on things including augmented reality for its app. At the Wall Street Journal’s Tech Live conference on Tuesday, Mr. Spiegel said that as a result of the pandemic, brands have been more willing to try augmented reality to reach customers. Makeup and shoe brands, for example, are using Snap’s augmented reality to let users try their products.

Todd Horwitz Chief Strategist BubbaTrading.com
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