Why is Snap stock tumbling today?

Snap stock tumbled 9.8% in pre-open trading to reach $5.34 after the Snapchat parent delivered a mixed third-quarter earnings report Wednesday evening that disappointed on the metrics investors prioritize most.

Revenue of $1.72 billion came in just below the $1.73 billion Wall Street consensus, while daily active users reached only 495 million, falling short of the 499 million analysts had projected.

The advertising business was a particular sore spot, with ad revenue growing just 4% year-over-year in Q3 — a sharp deceleration from the 9% growth recorded in Q2.

Chief commercial officer Ronan Harris attributed part of the shortfall to reduced spending from consumer packaged goods companies, while CEO Evan Spiegel acknowledged that "advertising revenue growth remains below our ambitions." Compounding the negative reaction, Snap said it will stop reporting daily active users starting in 2027, shifting to monthly active users as its primary engagement metric — a decision that some market participants interpreted as an attempt to obscure slowing user momentum.

On the analyst front, Mizuho maintained a Neutral rating and $6 price target, while B.Riley trimmed its target to $8 from $10 but kept its Buy rating, citing strong operating leverage and a Q4 outlook that edged past consensus.

The broader market offered little cushion for Snap’s decline. The S&P 500 was essentially flat, the Dow Jones edged modestly higher, and the Nasdaq was under mild pressure, meaning there was no broad risk-on rally to soften the blow from the company-specific disappointment. Snap’s social media peers have also faced a difficult year, reflecting sector-wide headwinds in digital advertising.

Taken together, the revenue miss, the user growth shortfall, a meaningful deceleration in advertising revenue, and the controversial decision to retire a key engagement metric proved too much for investors to overlook — even as the company delivered its first GAAP-profitable quarter in years, with net income of $56 million and adjusted EBITDA of $383 million well ahead of expectations.