Snap Aug 4

Rating Company Date 4 August 2026 Buy Snap North America Reuters Bloomberg Rating Buy SNAP.N SNAP US Price target (USD) 8.00 United States Price at 3 Aug 26 5.04 52-week range 9.47 – 3.93 TMT Internet Valuation & Risks

The Turnaround Is Becoming More Visible Benjamin Black, CFA SNAP delivered a strong 2Q26, with revenue increasing 19% y/y to $1.60bn and Research Analyst Adj. EBITDA reaching $250mn, both comfortably ahead of expectations. More importantly, the composition of the upside supports a more durable growth Kunal Madhukar, CFA outlook, in our view. Direct-response product improvements and better go-to- Research Analyst market execution drove broad advertising strength, while North America LCS trends improved for a second consecutive quarter. Given LCS represents more Raymond Wong than 40% of Snap’s business, removing this drag should make the strong growth Research Associate in lower-funnel, SMB and international advertising increasingly visible in consolidated results. We do note, however, that the FIFA World Cup was a benefit that likely persists into 3Q and we think the Middle East conflict-related drag was Benjamin Hui, Esq. Research Associate below management's initial guide. Importantly, SNAP guided 3Q revenue to $1.70bn-$1.74bn, representing approximately 13%-15% y/y growth, versus our prior estimate and the Street at ~$1.70bn, which we expect will lead to broad based positive earnings revisions.

North America DAUs held stable q/q at 92mn, ahead of expectations. We see a credible path to more durable stabilization as AI-driven content ranking improves relevance, Spotlight develops a stronger creator and consumption flywheel, and SNAP gives users more reasons to engage across communication, Map and AR. U.S. Spotlight posters increased more than 115% y/y and daily viewers grew more than 20%, suggesting the engagement improvement extends beyond a single product change.

Subscriptions provide a second, increasingly material growth engine. Other Revenue increased 85% y/y, supported by Snapchat+, Memories storage and the higher-priced Lens+ offering. Snap also offers tiering through Platinum and differentiated AI creative tools. Fewer than 3% of MAUs currently pay, versus management’s industry benchmark of 7%-12% long-term penetration, leaving substantial runway even without assuming Snap reaches the upper end of that range.

Specs remain a focal point for investors and SNAP has a legitimate first-mover advantage through its vertically integrated AR stack, established developer ecosystem and years of platform development. However, the $2,195 ASP, limited emerging consumer use cases, modest 100k maximum target for the first version, and scaled competition leave us skeptical that Specs becomes financially material in the medium term. We are encouraged by the disciplined investment approach, with near-term spending focused on product quality, customer

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experience and ecosystem development ahead of expected mass-market adoption closer to decade-end.

SNAP raised its FY26 infrastructure cost outlook by $50mn to $1.65-$1.70bn to preserve flexibility to invest behind DR optimization and the broader ad platform. We view this as offensive spending: the 56% increase in platform conversions demonstrates improving returns, and incremental infrastructure investment should reinforce measurement, automation, ranking and campaign performance rather than simply support current usage.

All in all, we increase our 3Q26/FY26/FY27 revenue estimates by 3%/2%/2% and Adj. EBITDA estimates by 15%/9%/8%. We maintain our Buy rating and $8 target price, based on an unchanged 10x FY27E Adj. EBITDA multiple.

North America Stabilization Increasingly Visible North America was an important positive development in the quarter. Revenue…