The number of Daily Active Users on Snapchat rose 17% year-over-year during Q2

CEO Evan Spiegel says, “We continued to grow our community and business in a challenging and uncertain environment. I am proud of our team for innovating on new experiences for our community and driving value for our partners, demonstrating the importance of our service in people’s lives. We are grateful that the resilience of our business has allowed us to remain focused on our future growth and opportunity.”

Some of the Q2 results released by Snap seem promising as the daily average number of users watching Shows rose 40% year-over year. The daily average of Snapchat users over the age of 35 who were viewing the app’s Discover news feed rose 40% on an annual basis during the second quarter. And Snap also announced expanded multi-year content partnerships with Disney, ESPN, NBC, ViacomCBS, the NBA, and the NFL.

Snap CFO Derek Anderson said that the early bounce that Snapchat received when the pandemic forced people to stay at home has ended. Anderson also pointed out that things have yet to return to normal making it hard to forecast what the current quarter’s results might be. He stated that “At the onset of widespread shelter in place orders, as people sought to stay connected and entertained from home, we observed an increase in daily active users that informed our initial estimate. This initial lift dissipated faster than we anticipated as shelter in place conditions persisted. Advertising demand in Q3 has historically been bolstered by factors that appear unlikely to materialize in the same way they have in prior years, including the back to school season, film release schedules, and the operations of various sports leagues. At this point in time it is difficult to predict how these factors may impact advertising demand in the remainder of Q3.” The company said that so far in Q3, revenue is up 32% from the previous year, but it expects that growth to slow down through the rest of the quarter, ending up with an increase of 20% in advertising revenue for Q3.

Investors aren’t grasping the future potential of Snapchat based on the larger flow of red ink. After hours when the report was released, the shares dropped over 6% to $23.20 a share.