Snap Inc. beat Wall Street's second-quarter revenue forecast and also guided third-quarter sales above analysts' expectations, with its first augmented-reality glasses slated to arrive in September.
Snap still earns the bulk of its money from advertising, which rose 9% to $1.28 billion.
Earlier this year, Snap warned that conflict in the Middle East could pressure its advertising revenue. That warning contributed to a stock drop after its May earnings report. Monday's shareholder letter, however, made no reference to the war.
Snap's latest results provide some breathing room as the Specs launch approaches. The company still depends heavily on advertising, which accounted for $1.28 billion of the $1.6 billion in quarterly revenue. The stock's steep decline this year signals that investors have been cautious about the company's prospects.
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Advertising's 9% gain in the quarter trailed Snap's overall revenue growth of 19%, highlighting why the company is pushing into hardware and other areas beyond its core social app.
Snap's May warning was a reminder that its advertising revenue can be affected by events outside its control. The company has tried to offset that exposure by investing in Specs, but it is still far smaller than Meta and Alphabet, which can pour billions into AI and data centers. That scale gap makes the September debut more than a product launch; it is a test of whether Snap can build a meaningful business beyond its core app.
Snap, the company behind Snapchat, plans to start selling its debut AR eyewear, Specs, in September. CEO Evan Spiegel described the AI-equipped spectacles as "our largest long-term opportunity" in Monday's shareholder letter.
"We are building toward the future of computing with SPECS," Spiegel wrote. "I believe AI will fundamentally change our relationship with computers. We will spend less time operating them and more time supervising intelligent systems that understand context and complete work on our behalf. SPECS are built for that future."
Snap is taking a different AI path from many of the biggest technology companies. The bigger rivals include Meta Platforms Inc. and Google, which is part of Alphabet Inc. Both companies have committed tens of billions of dollars to advanced AI models and data centers.
Those huge outlays are reshaping the social media industry and fueling investor worries about excessive spending. Rather than funding giant AI systems and server farms, Snap has put its resources behind its AI-enhanced eyewear, the Specs. Spiegel believes the spectacles can reach users beyond Snapchat and widen the company's audience.
Next month's debut gives Snap an opportunity to prove its hardware can be as important as its app. If Specs gains traction, the company would have a new product beyond advertising. If it does not, Snap remains exposed to the same ad market that led to its earlier warning this year.
By choosing this path, Snap has taken a different approach from Meta and Alphabet, which are spending tens of billions on AI models and data centers. That gap keeps Snap tied to digital-ad spending and makes the Specs launch a critical test.
Snap now enters September with a beat on revenue and a stronger forecast, yet its challenges are unchanged. The Specs debut gives the company a chance to prove that its hardware bet can lessen that dependence on advertising over time.
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