But the share prices gave up much of those gains soon after, as the news sunk in that the company's user base wasn't growing as expected, with Snapchat losing daily active users quarter-over-quarter for the first time in its history.
Snap Inc. on Tuesday reported a better than expected loss of $353.3 million in its second quarter, sending the stock up as high as 6 percent in after-hours trading.
The ephemeral social media company revealed in its latest earnings report that its daily active user count has dipped, attributing the decline to early frustrations with its new-look app. That has come at the cost of the premium feel Snap had tried to ascribe to its ads, but given overall sales a jolt by attracting more advertisers.
Snap, the parent company of Snapchat, has announced its first decline in daily active users following a controversial redesign.
Separately, Saudi billionaire Prince Alwaleed Bin Talal said he invested $250 million for a 2.3 percent stake in the social-media company.
Analysts on average expected Snap to gain almost 2 million users in the second quarter from the first.
Snap, which has never had a profitable quarter, went public in March 2017 with a $17 (roughly Rs. 1,200) share price. But the closely followed average revenue per user increased to $1.40 from $1.05 in the same quarter a year ago. Despite the decline in active monthly users, Snapchat saw its revenues jump to $262.3 million, up by 44 percent from the same quarter a year ago.
But some analysts on Tuesday brushed off Snap's user drop, saying that Snapchat always had more limited appeal than larger rivals.
"We have been working hard to iterate and improve Snapchat based on the feedback from our community", Evan Spiegel said on a call.
"On the positive side, Story Ads transitioned to programmatic (75% of ad revenue now programmatic), Snap Pixel entered general availability, and the self-serve platform saw some updates in the quarter". The company beat analyst expectations on revenue, reporting $262 million in revenue, compared with analysts' expectations of $251 million. Investors will also applaud the company for offering explicit guidance for the first time.