Snapchat Is in the Black — Until You Count the Stock Pay

Snap, the company behind Snapchat, reported $250 million in adjusted EBITDA for the second quarter (April–June). In the same quarter it booked $263 million in stock-based pay for its employees, a cost that is left out of the adjusted figure.

A $164 Million Loss

Revenue rose 19% to $1.6 billion, driven mostly by subscriptions such as Snapchat+. Under standard accounting rules (GAAP), Snap lost $164 million in the quarter, compared with $262.6 million a year earlier. Free cash flow came to $121 million.

The gap between the loss and the adjusted figure is $414 million. Stock pay is the largest item added back. Next come $128.5 million in restructuring charges, as full-time headcount fell from 5,381 to 4,723 during the quarter.

This is not a one-off. Over the past four quarters, Snap has expensed $1.03 billion in stock-based pay, against $1.02 billion in adjusted EBITDA.

Engineers Get the Biggest Share

Nearly three of every four dollars in stock pay is booked under research and development: $193.5 million in the second quarter. In practice, that is the pay of the engineers who build the app. Sales and marketing accounted for $47 million, general and administrative for $20 million.

Snap pays in restricted stock units (RSUs), shares employees get for free as long as they stay, usually vesting over three to four years. The expense is the share price on the grant date times the number of shares, spread over the vesting period. Stock options have all but disappeared: Snap has fewer than half a million left, against 205 million unvested RSUs.

Shareholders Pick Up the Bill

Stock pay takes almost no cash when it is handed out. But every share an employee receives is a new share with a claim on the same company.

Snap keeps the share count in check by buying back its own stock. In the first half it spent $601 million on buybacks, more than its entire free cash flow of $407 million. Even so, Snap had the same number of shares at the end of June as a year earlier: 1.68 billion.

Starting in 2027, Snap plans a multi-year program to offset dilution, funded mainly from free cash flow. So stock pay does cost cash after all. It just shows up as buybacks instead of salaries.

A low share price makes the math worse. Shares granted in the first half were valued at $5.61 on average, versus $9.23 for the shares still unvested at the end of 2025. The same pay now takes more shares, and the pool of unvested shares has grown from 143 million to 205 million in a year.

Investors who buy the stock don’t get a vote, either. Class A shares, which both investors and employees receive, carry no voting rights. Co-founders Evan Spiegel and Bobby Murphy control the vote through their own Class C shares.

Profit Promised for 2027

Management expects sustained positive net income starting in 2027. For the third quarter, Snap guides to adjusted EBITDA of $300 million to $350 million as savings from the layoffs show up more fully. Stock-based pay for all of 2026 is projected at about $1.05 billion, roughly the same as last year.

User growth has moved. Daily active users fell 7% in North America and 2% in Europe, while the rest of the world grew 12%. There, Snap earns about a tenth as much per user as in North America.

The stock trades around $6, against a $17 IPO price in 2017. In August, a federal appeals court ruled that social media platforms lack blanket immunity from lawsuits.

That lets more than 3,000 cases over harm to young users proceed. Two new trials involving Snap are scheduled for October.

Snap reports third-quarter results on November 4.