Shares of social media company Snap (SNAP) have lost 49% of their value over the past year and are trading under $10. The stock took another hit, dropping another 15% on Wednesday, April 30 as of this writing, following the release of its Q1 financial results. Despite exceeding the Street’s expectations on the top and bottom lines, Snap’s management issued cautionary notes about ongoing challenges in the advertising landscape.

Advertising Slowdown Adds to Uncertainty

One of the issues Snap is facing involves changes to the de minimis exemption, a trade policy that previously led low-cost goods to enter the U.S. tariff-free. President Donald Trump’s administration has been working to end the exemption. Notably, Chinese e-commerce companies, which have leaned heavily on the exemption to keep prices low, will now reconsider their advertising strategies. The higher import costs will likely force them to raise prices, leading to a decline in demand and their appetite for advertising on U.S. platforms like Snap.

This shift is already being felt. Snap acknowledged revenue growth continues, but some of its advertising partners are pulling back on spending. Because of the uncertainty, the company refrained from offering guidance for the second quarter. This added to investor unease.

What’s Ahead for Snap?

While macroeconomic headwinds and trade policy shifts pose challenges, Snap stock looks like a bargain. Trading under $10, the company has a massive and growing user base and continues to improve its ad tech and product offerings.

Snapchat reported 460 million daily active users (DAUs) in the first quarter of 2025, up 7 million from the prior quarter and 9% year-over-year. Much of this growth stems from global markets, where the adoption of visual communication continues to gain traction. Snap is also taking steps to grow its user base in North America and Europe, with a strategic focus on enhancing core visual messaging features, improving its AI and machine learning systems for more personalized content, and enhancing its creator ecosystem.

Revenue growth in Q1 was solid, particularly in direct response (DR) advertising, which surged 14% year-over-year. Total advertising revenue rose 9% to $1.21 billion, though brand advertising dipped slightly by 3% due to softer demand and a shift toward performance-focused campaigns. Notably, DR ads now make up 75% of total ad revenue. Snap also saw a 60% year-over-year increase in active advertisers, driven in part by small and medium-sized businesses and the success of Snap Promote.

Snapchat+ continues to grow rapidly as a paid offering, with subscription revenue climbing 75% year-over-year to $152 million in Q1. The service has nearly 15 million subscribers, representing a $600 million annualized run rate and a 59% increase in user base from a year ago.

On the product front, Snap is evolving the user experience with features that deepen engagement, such as streamlined group creation and Snap replay capabilities. Its conversational AI, “My AI,” has also seen a 55% jump in daily users in the U.S., driven by new multimodal features and improved responsiveness powered by its Gemini model.

Snap’s ad tech is evolving quickly. It has boosted the speed and quality of its machine-learning models and aligned ad optimization more closely with advertiser goals. These enhancements have significantly improved ad relevance and performance.  

The Bottom Line

Wall Street analysts currently maintain a “Hold” rating on Snap, reflecting the cautious sentiment surrounding short-term challenges. However, the company is expanding its user base, diversifying its advertiser and revenue mix, growing Snapchat+ subscriptions, and keeping costs in check. Snap also maintains a solid balance sheet, giving it the flexibility to navigate tough macroeconomic conditions.

With its increasing scale, higher user engagement, and ongoing investment in augmented reality and AI, Snap is well-positioned to deliver solid growth in the future. For investors with a longer time horizon, Snap stock looks attractive under $10.