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Snap's earnings show that users aren't disappearing anymore

Revenue rose. Users stayed. Shares go through the roof.

Snapchat logo is seen on an android mobile phone
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Snap, which has struggled to keep users on its Snapchat app, broke its losing streak.

Snap said Tuesday that 186 million users logged in to the vanishing-messaging app daily in the fourth quarter, the same number as in the previous quarter. Snap had seen a drop in daily usage for two consecutive quarters last year after an unpopular redesign of the app.

The results helped the company boost revenue and narrow its loss compared with the same period last year.

Investors loved the news, pushing the company's shares as much as 20 percent higher in after-hours trading. 

That isn't to say Snap doesn't have challenges. The company is working on a new version of the app for Android. Snap is also dealing with a string of executive departures, including Tim Stone, the chief financial officer who said last month that he was leaving after less than a year on the job. It also has to compete with larger social networks such as Facebook and its Instagram service, both of which have been investing more in ephemeral messaging, for ad dollars. 

"The transitions we made in both the Snapchat platform and our business last year were necessary and created many of the opportunities we have ahead of us," said Snap CEO Evan Spiegel during a conference call with analysts. "But change is always difficult and this past year was no exception."

Snap has rolled out a new version of its Android app to a small percentage of its users, but didn't say when it will be released more broadly. 

Spiegel also said during the conference call that the company is trying to get users between the ages of 13 to 34 to spend more time on the app by releasing more original shows on the platform. At the same time, the company is focusing on personalizing the app for users above 34 years old and expanding internationally. 

In the fourth quarter, the company grew its revenue by 36 percent, to $389.8 million, beating the $377.52 million expected on average by analysts surveyed by Thomson Reuters.

Snap reported an adjusted loss, which excludes expenses such as employee stock compensation, of 4 cents a share compared with a loss of 13 cents in the same quarter last year. Analysts expected a loss of 7 cents a share. 

The company also doesn't expect daily active users to decline in the first three months of 2019. 

"The fact that Snap was able to maintain its daily active user base quarter over quarter is a positive sign," Debra Aho Williamson, an analyst with eMarketer, said in an email. "When Snap finally rolls out its updated Android app, it could move the company back into growth territory."

First published Feb. 5, 1:23 p.m. PT
Update, 2 p.m.:
Adds quote from analyst. 3:17 p.m.: Adds remarks from conference call. 

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