Good afternoon, everyone, and welcome to SNAP, Inc.'s fourth quarter 2025 earnings conference call. At this time, participants are in a listen-only mode. I would now ask you to turn the call over to David O'Meter, Head of Investor Relations.

Thank you, and good afternoon, everyone. Welcome to SNAP's fourth quarter 2025 earnings conference call. With us today are Evan Spiegel, Chief Executive Officer and Co-Founder, and Derek Anderson, Chief Financial Officer. Please refer to our investor relations website at investor.snap.com to find today's press release, earning slides, and investor letter. This conference call includes forward-looking statements which are based on our assumptions as of today. Actual results may differ materially from those expressed in these forward-looking statements, and we make no obligation to update our disclosures. For more information about factors that may cause actual results to differ materially from these forward-looking statements, please refer to the press release we issued today, as well as risks described in our most recent Form 10-K or Form 10-Q, particularly in the section titled Risk Factors. Today's call will include both GAAP and non-GAAP measures. Reconciliation between the two can be found in today's press release. Please note that when we discuss all of our expense figures, they will exclude stock-based compensation and related payroll taxes, as well as depreciation and amortization and certain other items. Please refer to our filings with the SEC to understand how we calculate any of the metrics discussed on today's call. With that, I'd like to turn the call over to Evan.

Hi, everyone, and welcome to our call. Last fall, we embarked on a new chapter for our company with the articulation of the crucible moment faced by our business. At that time, we laid out our plans to accelerate and diversify our revenue growth, pivot our business toward more profitable growth, and deliver on the commercial launch of specs in 2026. The impact of this strategic direction began to manifest in the operating results of our business in Q4, and we are excited to build on this momentum in the year ahead. Over the last three years, we have grown monthly active users by more than 150 million, reaching 946 million in the most recent quarter, and bringing us within striking distance of our goal to reach 1 billion global monthly active users. We have already achieved immense reach and depth of engagement in many of the world's most attractive advertising geographies, and we believe this affords us a significant opportunity to grow our top line and expand average revenue per user over time. Growing our community in these prosperous geographies remains a priority, and we remain committed to our long-term goal of reaching one billion monthly active users. But going forward, we will seek to strike a better balance between the pace of community growth and the rate of top line growth in order to pivot our business to more profitable growth. For the advertising business, our focus will be on three core initiatives. The first is fostering direct connections between brands and Snapchatters by leveraging our core product capabilities across Snapchat. The second will be making it easier and more performant for advertisers to connect with Snapchatters by leveraging AI tooling and capabilities end-to-end through our ad platform, including creative development, campaign setup, and performance optimization. Finally, we plan to grow our advertiser base by scaling and optimizing our go-to-market operations that support the success of small and medium-sized businesses. Ultimately, we will grade the performance of our advertising business based on the rate of growth in advertising revenue, with a focus on gaining share over time. The other revenue portion of our business has become an outside source of growth and is playing a critical role in diversifying our top line. In the year ahead, we will focus on growing existing subscription offers, including Snapchat Plus and memory storage plans, while innovating to bring compelling new offers to our platform. This momentum is already materializing, with subscribers growing 71% year-over-year to reach 24 million in Q4. In the year ahead, growth in subscribers will be a critical input metric to track our progress, and we will ultimately grade our performance based on the growth of the annualized run rate for other revenue. We are focusing on three significant catalysts for gross margin expansion to drive profitable growth. First, with community growth focused on monetizable markets and with our cost-to-serve increasingly calibrated to the monetization potential of each market, we expect that our infrastructure costs will pivot from being a source of gross margin pressure to become a margin-accretive investment. Second, as more of our ad revenue is derived from higher margin placements, such as sponsored snaps and promoted places, we expect advertising margins to improve. Third, we expect that the growing scale of our subscription business, which is built on a foundation of existing engagement and infrastructure investment, will become increasingly accretive to overall gross margins. In the Crucible Moment letter shared last fall, we set a near-term goal to achieve 60% gross margins. We have already made meaningful progress toward that goal by achieving a 59% gross margin in Key 4, and we believe there is a clear path to exceed this goal in 2026. We are excited about our plans to accelerate top-line growth, diversify our revenue streams, and build a more financially efficient business in the year ahead. Ultimately, we will grade our performance on our progress toward achieving meaningful net income profitability over the medium term. Importantly, we believe we can deliver on this profitable growth path as we continue to invest in the future of augmented reality and support the consumer launch of specs later this year. For our community, we are focused on strengthening engagement in the world's most developed advertising geographies by building experiences across Snapchat that spark conversations and deepen relationships between Snapchatters. The connections between friends and family are what unify our camera, messaging, SnapMap, and content experiences and enable our platform to enrich the lives of Snapchatters around the world. By prioritizing features that encourage creativity, discovery, and interaction across these surfaces, we aim to increase the relevance and durability of engagement in ways that support long-term community growth and monetization. Our camera remains central to how Snapchatters communicate and express themselves, and is often the starting point for conversations on Snapchat. We are enhancing our camera with AI-powered capabilities that make creation more intuitive, dynamic, and social. Recent breakthroughs in our proprietary models allow us to deliver high-quality, generative AI camera experiences efficiently at scale by running our models on device. AI-driven lenses represent a meaningful evolution from traditional lenses, shifting the experience from applying a fixed set of visual overlays to creating images and scenes dynamically through generative AI. Snapchatters can now prompt, explore, and co-create personalized content in real time, and this shift is already resonating with our community. More than 700 million Snapchatters have engaged with generative AI lenses more than 17 billion times, often discovering and sharing these lenses through conversations with friends and family. Our Imagine Lens, launched in September, has already been engaged with nearly 2 billion times, highlighting strong early traction and repeat usage. This momentum is supported by a global creator and developer ecosystem that is unmatched in scale. More than 450,000 creators from nearly every country have built over 5 million lenses using our industry-leading AR and AI tools, helping ensure that camera experiences remain fresh, relevant, and closely aligned with how our community builds relationships. Sharing Snaps with friends and family remains the foundation of Snapchat and a core driver of engagement, retention, and long-term value creation. Our platform is designed around visual communication that enables frequent interactions and helps our community maintain close relationships over time. We continue to see strong momentum and direct communication between friends and family, with messaging behaviors reflecting the durability of Snapchat's core value proposition. For example, average daily messages sent increased 5% year-over-year, and the number of bi-directional communicators increased 5% year-over-year in Q4. We are investing in product experiences that make it easier to start conversations, sustain them over time, and introduce new ways for friends and family to interact. For example, in Q4, we began testing topic chats, a new feature that allows Snapchatters to participate in public conversations around trending topics and events, discover shared interests, and explore what's happening visually across our community. We also began rolling out new two-player turn-based games designed to create playful, low-friction ways for friends and family to connect, such as two-player mini-golf and Magic Jump. In Q4, these experiences contributed to more than 200 million Snapchatters playing games every month on average, representing an increase of 90% year-over-year. The Snap Map has become an increasingly important driver of engagement by helping Snapchatters stay connected to friends, local communities, and places in the real world. Snapchatters use the SnapMap to see where friends are spending time, discover what is happening nearby, and engage with local businesses and events. Monthly active SnapMap users reach 435 million in Q4, up 6% year-over-year, creating natural opportunities for both organic engagement and monetization through ad placements such as promoted places. We have built a differentiated content platform powered by authentic content that is native to Snapchat and that reinforces human connection through content sharing as a conversation starter. Our systems increasingly surface timely, relevant content by identifying emerging trends and original formats across Spotlight and Stories and matching them to the right audiences. In Q4, enhancements to our ranking and trend detection models contributed to improved content freshness and engagement. For example, the number of Spotlight reposts and shares increased 69% year-over-year in the U.S., reflecting our ability to surface timely content at scale. In addition, Snapchat continues to be a platform where both established and emerging creators can grow an audience and build a sustainable business. For example, Rhonda Adami, a nail designer and travel creator, grew her follower base by more than 20 times over the last six months by consistently posting to Spotlight and leveraging engagement tools such as Q&A and Spotlight comments to strengthen connections with her viewers. As we continue to innovate across these surfaces, we are seeing the impact of better calibrating our investments and community growth and costs to serve with the long-term monetization potential of each market. In Q4, global monthly active users increased by 3 million quarter-over-quarter to 946 million, while global daily active users declined by 3 million quarter-over-quarter to 474 million. The decline in global DAU in Q4 reflects in part our decision to substantially reduce our community growth marketing investments in order to focus on more profitable growth. Improving average revenue per user through more direct monetization of our core product remains a key priority, including continued growth in Snapchat Plus, the expansion of sponsored snaps in promoted places, the launch of Lens Plus, and memory storage plans. While these initiatives involve tradeoffs with engagement, they are strengthening top-line performance, supporting more stable and retentive subscription-based revenue streams, and improving the gross margin profile of our business. The regulatory environment also presents near-term risk to engagement metrics. In Q4, we implemented platform-level age verification in Australia in accordance with a new law requiring users to be at least 16 years old, resulting in the removal of approximately 400,000 accounts. We have since begun testing new signals from Apple's declared AgeRange API, and we plan to test Google's solution once it becomes available. While these actions may adversely affect engagement metrics as implementation progresses, we believe it is the right thing to do to maintain the long-term trust of our community and partners, and we remain committed to our long-term goal of serving more than 1 billion global monthly active users. Our long-term vision for augmented reality extends beyond the smartphone to a future when computing is more natural, contextual, and seamlessly integrated into the real world. For more than a decade, we have invested in building a platform that brings digital experiences closer to how people see, move through, and interact with their everyday environments. Specs are central to this vision. After five generations of development and refinement, we plan to launch Specs publicly in 2026, which we believe represents a significant step forward in human-centered computing and the evolution of our AR platform. As we prepare for launch, we have continued to strengthen both the platform and the ecosystem that is designed to support adoption at scale. We began testing SnapCloud powered by Supabase to make advanced backend capabilities more accessible within Lens Studio, enabling developers to build richer, more dynamic AR experiences. We also announced that all lenses built today for Spectacles will be compatible with specs at launch, providing continuity and scale for developers from day one. Partners and developers are already building, compelling AR experiences that demonstrate the breadth of what is possible on Star Wars Holocron Histories from ILM is now live on Spectacles, highlighting the power of smart glasses for immersive storytelling with one of the world's most beloved franchises. This experience showcases the studio's continued innovation in technology and platforms through an extension of the Star Wars galaxy. In addition, developer Harry Banda created Cardmaster, a multiplayer AR card game that let's players face AI opponents in classic card games with tutorials and achievements, evolving into a broader suite of AR card experiences for specs. We believe Snap is uniquely positioned to lead the next wave of spatial computing. With Snap OS 2.0, Lens Studio, Snap Cloud, and a global developer ecosystem, we have built an end-to-end AR platform spanning software, tools, and hardware. Together, these capabilities position us to deliver fully standalone, human-centered eyewear that expands creative expression and unlocks new ways for people to engage with the world around them. In Q4, we made meaningful progress executing against the three priorities guiding the evolution of our advertising business, fostering more direct connections between brands and Snapchatters, making advertising on Snapchat easier and more performant through our AI-driven ad platform, and expanding our advertiser base by scaling and optimizing our go-to-market operations for small and medium-sized businesses. Together, these efforts delivered measurable improvements in advertiser performance to positioning us for more durable growth as we enter 2026. We are focused on fostering more direct connections between brands and Snapchatters by enabling advertisers to participate natively in the experiences our community use every day on Snapchat, including messaging, the SnapMap, our AI-powered camera, and creator-led content. These surfaces allow brands to show up in ways that feel timely, relevant, and aligned with how our community communicates and discovers the world around them. High-impact, conversation-driven placements are playing an increasingly important role across both upper and lower funnel objectives. Sponsored snaps continue to gain traction in Q4 as one of our most differentiated ad placements, allowing brands to engage directly with Snapchatters. Sponsored snaps' revenue grew meaningfully quarter over quarter, supported by in-app optimizations and early testing of dynamic product ad integrations. Advertisers are seeing strong results from this placement. In Q4, sponsored snaps click-through rates grew 7% and click-through purchases grew 17% from Q3 to Q4, during which numerous format and ranking improvements were introduced. For example, global travel company Kontiki used sponsored snaps to drive lower funnel bookings, achieving a 283% increase in ROAS and a 72% reduction in cost per purchase, highlighting the format's ability to connect creativity with measurable outcomes. In addition, Shein used sponsored snaps as part of a total takeover campaign to amplify the launch of its 2025 collection, connecting an online-to-offline event with high-impact camera-native creative that drove engagement beyond digital impressions. The campaign exceeded impression benchmarks by 20% while delivering CPMs below standard benchmarks, demonstrating strong efficiency, scale, and the effectiveness of clear product-led creative with a direct call to action. We're also seeing advertisers amplify lower funnel outcomes by combining complementary ad formats across the Snapchat experience. For example, Saudi QSR brand Kudu combined creative AR lenses with sponsored snaps to drive full funnel performance, achieving up to 49.5% lower cost per sign-up, 3.76 times more app installs at 76% lower CPI, and 38 times more purchases at an 84% lower cost per purchase. Promoted Places further extends this strategy by translating digital engagement into real-world action. Early results from our Promoted Places beta saw an average 65% reduction in cost per incremental visit and an average double-digit visitation lift, according to third-party foot traffic measurement by InMarket. We continue to leverage AI to make it easier for advertisers to connect with Snapchatters while delivering stronger performance and more consistent returns. By embedding AI across our advertising platform, from creative development and campaign setup to delivery and optimization, we are reducing friction for advertisers and improving ROAS at scale, particularly across direct response use cases. A central focus of our AI strategy is simplifying how advertisers plan, launch, and manage campaigns on Snapchat. Our smart campaign solution suite, including smart targeting and smart budget, uses AI to identify incremental high-value audiences and dynamically allocate spend across objectives, reducing the need for manual setup and ongoing optimization. We also began early testing of smart ads, which automatically assemble and iterate creative elements to identify the highest-performing combinations. These tools are designed to reduce creative friction, accelerate learning cycles, and shorten time to spend. Improving direct response performance remains a core priority within this effort. In Q4, we delivered meaningful progress across both DPA and app advertising. For DPA, targeted ranking, format, and delivery improvements delivered a 55% reduction in cost per action for 7-0 conversions and 45% reduction in cost per action for 1-0 conversions amongst all pixel-purchased GBBs, based on cumulative internal testing over the past year. DPA revenue grew 19% year-over-year, supported by expanded adoption among large advertisers and continued migration to higher-performing dynamic solutions. For example, Wolfpack, a North America retail fashion and apparel brand, leveraged dynamic product ads to drive lower funnel performance, delivering 90% higher return on ad spend compared to non-DPA campaigns. Our app advertising business also accelerated meaningfully in Q4. Revenue from in-app optimizations grew 89% year-over-year, supported by advances in foundational app models, broader adoption of the app power pack, and new immersive formats such as playables. For example, our partnership with Triumph Arcade delivered 2.6 times more app installs at 37% lower CPI and 94% more purchases at a 15% lower cost per purchase, demonstrating how native formats can drive strong lower funnel outcomes. We are growing our advertiser base by scaling and optimizing go-to-market operations that support the success of small and medium-sized businesses. SMBs contributed the majority of advertising revenue growth for the sixth consecutive quarter, underscoring sustained product market fit and the impact of our investments. In Q4, total active advertisers increased 28% year-over-year, driven in part by simplified onboarding, improved campaign workflows, and increased performance. We reduced setup friction by enhancing ads manager workflows and expanding integrations across the commerce and measurement ecosystem, enabling advertisers to launch campaigns directly from partner platforms. We also strengthen our SMB offering through new partnerships, including a global integration with WIX, which allows e-commerce businesses to more easily create campaigns, manage catalogs, and improve measurement. In addition, we are investing in AI agents designed to accelerate SMB activation through automated recommendations and onboarding optimizations that reduce decision friction and improve performance. Our Q4 results reinforce our confidence in the strategic direction outlined in our 2026 plan. By fostering deeper connections between brands with Snapchatters, improving advertiser performance through AI, and expanding our advertiser base with greater discipline, we are building a more resilient and competitive advertising business. As we move into 2026, we will continue to grade our progress based on growth and conversions, improvements in ROAS, expansion of our active advertiser base, and ultimately the rate of growth in advertising revenue and share over time. I'll now turn the call over to Derek to discuss our financials.

Thanks, Evan. Q4 was a pivotal quarter for our business as we began to see the impact of our strategic focus on profitable growth translate into further revenue diversification, meaningful gross margin expansion, elevated flow-through of top-line growth to adjusted EBITDA, the achievement of net income profitability, and substantially improved free cash flow generation. Total revenue was $1.72 billion in Q4, up 10% year-over-year. Advertising revenue reached $1.48 billion in Q4, up 5% year-over-year, driven primarily by growth in DR advertising revenue. The growth in DR advertising revenue was driven by strong demand for our pixel purchase and app purchase optimizations, as well as continued strength from the SMB client segment. Other revenue increased 62% year-over-year to reach $232 million in Q4, with subscribers growing 71% year-over-year to reach $24 million in Q4. Global impression volume increased approximately 14% year-over-year, driven in large part by expanded advertising delivery across sponsored snaps and spotlight. Total eCPMs declined approximately 8% year-over-year, with the rate of decline moderating by five percentage points quarter over quarter, driven by growing demand for sponsored snaps that helped boost yields for this new placement. We are encouraged to see our advertising partners experience strong advertising performance alongside this supply growth, and that the improvements in pricing and performance are bringing increased demand to the platform. Adjusted cost of revenue was $699 million in Q4, up 4% year over year, but growing at less than half the rate of our top line. Infrastructure cost per DAU was 86 cents in Q4 and below the top end of our full-year cost structure guidance range as we began to experience the initial benefits of better calibrating our cost to serve relative to the long-term monetization potential of the geographies in which we operate. The remaining components of adjusted cost of revenue were $289 million in Q4, or 17% of revenue, which is below the low end of our full-year cost structure guidance range, due in large part to the outsized growth of higher margin ad placements, including sponsored snaps and spotlight. With the combination of revenue growth outpacing infrastructure cost growth and a favorable shift in impression delivery mix, adjusted gross margin reached 59% in Q4, up from 55% in Q3 and 57% in Q4 of the prior year. Adjusted operating expenses were $660 million in Q4, up 8% year-over-year, but growing two percentage points slower than revenue. Personnel costs increased 8% year-over-year, driven primarily by a 7% increase in headcount, with hiring tightly focused on our core strategic priorities. Higher legal costs, including litigation and regulatory compliance-related costs, were an additional driver of operating expense growth in Q4. These factors were partially offset by reductions in community growth marketing spending as we began to execute on our strategic initiative to better calibrate our investments in community growth with the long-term monetization potential of each geography. Adjusted EBITDA was $358 million in Q4, an improvement of $82 million compared to the prior year. Adjusted EBITDA flow-through, or the percentage of year-over-year revenue growth that flowed through to adjusted EBITDA was 51% in Q4 and contributed to adjusted EBITDA margins expanding 9 percentage points to reach 21% in Q4. Importantly, we delivered positive net income of $45 million in Q4, up from $9 million in prior year. The $36 million year-over-year improvement largely reflects the flow through an adjusted EBITDA, offset by a $31 million increase in interest expense reflecting the high-yield notes issued earlier in the year. Stock-based compensation and related payroll expenses were $265 million in Q4, or approximately flat year-over-year as progress towards a flatter and leaner leadership structure helped power the business to net income profitability in Q4. Free cash flow was $206 million in Q4, while operating cash flow was $270 million. Over the trailing 12 months, free cash flow was $437 million and operating cash flow was $656 million as we continue to execute on translating top-line growth into sustained growth in cash flow. We continue to manage our share count carefully with share repurchases completed throughout 2025, helping limit share count growth to 3% in Q4. We ended Q4 with approximately $2.9 billion in cash and marketable securities and just $47 million in convertible notes set to mature in fiscal 2026. Given the strength of our balance sheet, our progress towards sustained free cash flow generation, and our desire to opportunistically manage our share count for the benefit of our long-term shareholders, we have authorized a new share repurchase program in the amount of $500 million. For the full year, we generated $5.93 billion in revenue, reflecting 11% year-over-year growth, driven by a combination of ongoing strength in our SMB advertising segment, as well as the rapid growth in our subscription business. We delivered $689 million in adjusted EBITDA, representing adjusted EBITDA flow-through of 32% in 2025. Importantly, we came within or below our full-year cost structure guidance across all key metrics as we managed our investment levels in balance with the rate of revenue growth realized by our business throughout the year. As we begin 2026, we are focused on accelerating top-line growth, further diversifying our revenue streams, expanding gross margins, and making meaningful progress towards net income profitability. Our investment plans for 2026 reflect these priorities, and our intention is to calibrate our investments to revenue growth as we move through the year. Our infrastructure investment levels for 2026 will be driven by our strategic initiative to better align our costs to serve with the long-term monetization potential of each geography in which we operate. As a result, our full-year cost structure guidance range for infrastructure costs is $1.6 to $1.65 billion, which would represent flat year-over-year infrastructure costs at the low end. We estimate that the remaining components of adjusted cost of revenue will be a combined 16 to 17 percent of revenue in each quarter of 2026, which would represent a one to two percentage point improvement over 2025, driven by the benefit of outsized growth and higher margin ad placements. Personnel costs are the largest component of adjusted operating expenses, and we expect headcount growth in 2026 to be roughly in line with a 7% headcount growth we experienced in Q4 of 2025, with hiring tightly focused on our core strategic priorities. We anticipate continued elevated legal and regulatory-related costs, and we plan to make meaningful, proactive investments in community safety that will contribute to adjusted operating expense growth. In addition, our adjusted operating expense range for 2026 includes incremental investments in product development and go-to-market support for the consumer launch of specs later this year. These factors will be partially offset by reduced spending on community growth marketing as we adjust these investments to better reflect the long-term monetization potential of each geography. As a result, we estimate that full-year adjusted operating expenses will be approximately $3 billion. For SVC and related expenses, we estimate approximately $1.2 billion in 2026. For Q1 specifically, our guidance range for revenue is $1.5 to $1.53 billion. Our Q1 revenue guidance range excludes any potential revenue from the perplexity integration, as we have yet to mutually agree on a path to a broader rollout. Given this revenue range and our investment plans for the year ahead, we estimate that adjusted EBITDA will be between $170 million and $190 million in Q1. As we begin 2026, we are excited to execute on our pivot towards profitable growth and to make incremental progress toward our medium-term goal of delivering meaningful net income profitability. The impacts of this strategic direction are already evident in our Q4 results, and we are incredibly proud of the work our team is doing to build on this momentum in Q1. Thank you for joining our call today, and we will now take your questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. In the interest of time, we ask that you please limit yourself to one question. After your initial question is asked, your line will be muted. At this time, we will pause momentarily to assemble our roster. The first question comes from Eric Sheridan with Goldman Sachs. You may proceed.

Thanks so much for taking the question, and thanks for all the depth of details in the updates on the quarterly results. I want to talk about one of the forward initiatives, Evan. You know, with SnapSpecs as one of the key priorities in the next one to two years, can you just go a little bit deeper into what you've built on the platform and the application and use case side and how you think it feeds into where you want to take the hardware side of the business? when we think about the next 12 to 18 months and how this fits into your broader strategic priorities for the company and more particularly for spatial computing longer term. Thanks so much.

Hey, Eric. Thanks so much for the question. We're super excited about what's ahead this year with the launch of specs and obviously graduating from the R&D phase of specs to broader consumer adoption. In preparation of that, we've been working on several prior versions of specs, including most recently the version released in 2024 to developers, you know, who can subscribe to specs and start building lens experiences. We've seen some people build really spectacular things, whether it's, you know, utilities or, you know, new educational tools, for example, like at-home chemistry lab, you can have an augmented reality to, you know, even some of the more interesting work we've been doing with the browser and the ability to stream video on a virtual screen grounded in the real world through your glasses. So it's been really exciting to see all the new use cases that developers are building for specs with the current version released back in 2024. And those will be able to run on the upcoming, the forthcoming version of specs released later this year. So I think we'll be able to launch with a really wide variety of compelling experiences, which I think is so important for the early success of a product like this. And we're just really focused on getting in the hands of early adopters. We're so fortunate to have this passionate base of developers, you know, hundreds of thousands of developers who've used Lens Studio to build lenses. And I think they're really excited about this forthcoming product. So really trying to engage them and early adopters with specs later this year is super exciting. And, you know, I think as we look out, you know, to future generations of the product through the end of this decade, you know, we've got a really clear path here to, you know, lightweight, affordable and incredibly powerful glasses that can deliver immersive experiences in the real world.

Thank you. The next question comes from Ross Sandler with Barclays. You may proceed.

High end of the range. And it also – yep. Can you hear me? Can you hear me?

We can now, yes.

We can now. The 1Q guide assumes a pickup in growth at the high end, and you guys mentioned that there's no perplexity in there. Could you just talk about what's driving that between DR and brand and how you're kind of expecting trends in 2026 in the ad business to play out?

Hey, thanks for the question. On the ad side, the biggest focus is continuing to generate additional demand by demonstrating the strong performance of the ad platform. So, you know, at the top of that, we're seeing really strong growth in active advertisers. They were up 28% year over year in Q4. as we continue to invest and scale our S&B go-to-market operations. And that's something you're going to see us build on into 2026. That's part of the investment plan for the year ahead, is to continue to scale that out so that we can build on the momentum we have there. We've seen especially strong growth in the medium customer segment globally, with medium customers in North America in particular being the largest contributor to absolute dollar growth there, which is good. So that's the kind of momentum we want to build on in 26. We do continue to face some headwinds in the North America large customer business, but there are some bright spots there, including the U.S. LCS financial services vertical as well as autos. You know, we have new leadership in place over the North America LCS segment. We've got new products to connect brands with Snapchatters, including sponsored snaps and promoted places to build with their and smart campaign solutions to make it easier for advertisers to leverage the full set of Snapchat placements to make those connections easy and performant. So those will be big themes that we'll be building on in 26 as well. In terms of the guide for Q1, you know, the macro operating environment has thus far remained relatively stable compared to what we saw in Q4. There's a lot of quarter left to go in Q1, of course, but our guidance range is built on the assumption that the macro environment continues to be stable. I hope that extra color helps a little bit.

Thank you. The next question comes from Rich Greensville with LightShit Partners. You may proceed.

A couple of questions. First, you know, the subscription side, which I know, Evan, if I go back to your letter a while ago, you sort of marked the importance of subscription. It seemed like it really accelerated this quarter. And I'm curious, are you marketing it differently? Are there new features that you added? I know you've talked about sort of charging for memories and other things that will add to this. But just in terms of what happened in Q4, it would be great to better understand what's happening inside of that snap. And then the other thing, I think two years ago, Evan, you got on this earnings call and you talked about the fact that you were sort of refocusing user growth efforts from Android developing markets to the bigger markets like the U.S. where the meat of your monetization was. And, you know, if I look at sort of where U.S. users or North American users have fallen to at 94 million, do you need to put even more effort into those efforts to sort of drive U.S. users or North American users? Just what's happening in the North American user market would be great to just better understand, given your focus there.

Yeah, thanks, Rich. We're definitely excited about what we're seeing on the subscriber side of the business. You know, certainly memory storage plans were a big driver of the subscriber growth that we've seen recently and also, you know, have helped improve retention rates overall. So that definitely, you know, has been really helpful to the subscription business. And we've got some other great, you know, features on deck coming up this year for the direct pay segment of our business. So really excited about that overall, and I think really helps support our efforts to diversify our revenue in addition to the small-medium customer growth that Derek mentioned. So overall, really excited about the progress on subscriptions and the diversification of our revenue. You know, as it pertains to user growth, I think, you know, if you take a step back and look at the growth overall of the platform, you know, monthly active users, now 946 million. And so we're pretty close to our goal of a billion monthly active users. And, you know, I think, as you know, you know, over the past three years, our community growth has really outpaced our revenue growth. And ARPA has actually declined while we've simultaneously increased the cost to serve, which has put downward pressure on our margin. So as we look at this crucible moment and the pivot to profitability, you know, we have immense daily reach and engagement in many of the most valuable advertising markets, including in North America. And we think we can strike a much better balance between pursuing community growth and also growing average revenue per user. So, you know, in addition to that, obviously, we're working through some of the regulatory landscape and some of the shifting user engagement patterns as we focus on organic growth. But I think, you know, taking that all in totality, we've made some choices to reduce community growth marketing spend, to adjust the cost to serve and to roll out additional paid features like, you know, the memory storage plans that we just discussed. And all those, you know, can cause headwinds to user engagement. So those changes actually free up more resources to focus on our most valuable geographies so that we can continue innovating and delivering great customer experiences, which we, you know, really believe is the most important driver of long-term growth.

Thank you. The next question comes from Dan Salmon with New Street Research. You may proceed.

Good morning, everyone. Evan, I wanted to just talk a little bit more about, as you called it, the sort of litigation or regulatory risk caused by changes in age verification policies, sort of broader teen smartphone and social media restrictions. You obviously commented on the actions that you took in Australia following the ban going into place there. But what I'm particularly interested to hear a little bit more about is the potential for those types of actions to impact North America. Obviously, a $4 million step down in the DAU this quarter. I'm curious just maybe to unpack a little bit of what drove that more and what the outlook could be there during the year. based on some of those litigation risks or regulatory risks you mentioned?

We're certainly aware of, you know, some pending legislations. Obviously, there's quite a bit working its way through the court system right now that would further restrict the use of Snapchat for our community. I think, you know, as we look at, you know, for example, global ad revenue from impressions served to users under the age of 18, that revenue is not material. So I think, you know, looking at sort of the revenue-generating potential of the business, looking forward. You know, we're not, you know, overly concerned about the changing regulatory environment. I will say, you know, one of the things that's very interesting is that if you look at the research studies that look at Snapchat specifically as separate from some of the studies that look at social media in totality, you know, I think what we continue to see, which, you know, makes us proud of the service we've developed, is that Snapchat actually has a positive impact on people's well-being and people's friendships, and that's actually in contrast to other services that don't necessarily have that positive impact. But I think we have had quite a bit of trouble as we look at the regulars explaining how different Snapchat is, because there is really this moment where people are expressing concern about use of social media. So we have to continue making the case that Snapchat and its orientation around your close friends and your family can have a really positive impact. I think that's backed up by the research, but certainly it's going to take time to prove that out, and especially as these regulations work their

way through the court system. Thank you. The following comes from Ken Golreski with

Wells Fargo. You may proceed. Thanks. Maybe first I'll touch on specs. Could you talk about, maybe Evan, could you talk about the kind of synergy between specs and SNAP services more broadly and the audience and kind of the developer base. And then talk about the right way to capitalize that entity. I mean, if you have confidence in the end product, how do you think about appropriately capitalizing that? Should it happen all within Snap? Should there be outside partners? And how do you accelerate kind of the development and the deployment of specs throughout the ecosystem? I'll stop there. Thank you.

Yeah, well, I think to just maybe take a step back on why we started working on specs in the first place, you know, when we invented Snap and we worked on things like ephemeral messaging or stories that put content in chronological order or even things like opening to the camera, our vision, our work was really designed to make, you know, computing or smartphones feel more human. And we think that's played a really important role in connecting people with their friends and their family. But we also saw a lot of limitations, you know, of the smartphone and of computers. And I think today people are spending something like seven hours a day in front of in front of a screen. And so I think there is at this moment a real opportunity to change what the computer is instead of something that, you know, you're constantly operating using a keyboard and a mouse, something that, you know, now powered by AI can actually get work done for you. And so in that way, it's really a continuation of this vision to try to work to make computing more human for folks. And so I think, you know, now that we are exiting the R&D phase, you know, of specs development, there's a couple of important things. One is developing a strong standalone brand. I think specs, the product itself, in many ways, appeals to a different audience segment than the core Snapchat audience. And it's going to be really important for us to develop a standalone brand identity for specs. And then I think longer term, you know, as we look at the rollout and broader deployment of specs, there may be opportunities to, you know, raise additional capital to accelerate, you know, balancing that, obviously, with our own sort of ownership interest and any potential dilution. So I think right now, you know, given that we're so close to launch, the key here is really just, you know, nailing the launch and making sure that we deliver an extraordinary product. And then, you know, I think we have a lot of flexibility to think about how we want to capitalize it moving forward.

Thank you. The next question comes from Justin Patterson with KeyBank. You may proceed.

Good afternoon. I wanted to talk about agentic coding. We've seen more companies see meaningful improvements in engineering productivity from these tools. How is this thing deployed at Snap today? And how should we think about potential benefits, whether it's product velocity, more engagement on the platform, more monetization opportunities, or expense efficiency? Thank you.

Yeah, there's just so much opportunity here. Obviously, you know, I think now something like 40% of new code at Snap is AI generated. We made a ton of headway with, you know, trust and safety and customer service in terms of automating those workflows. I think there's a lot of opportunity for the sales workflow as well, you know, to empower our sales team, but also to automate quite a bit of that. So certainly we're seeing gains across the board in how we're operating our business today. I also think, you know, this can be a real accelerant for our own creativity. I mean, one of the things we love to do is, you know, invent new services, and we've got a bunch of ideas for new apps, for example, that we could build using these AI tools and deploy very, very quickly, leveraging, of course, the distribution we have, our friend graph, some of the unique assets we have, like folks' memories, for example. So I think there's a lot of opportunity here for us to think about how we accelerate the growth of our business and actually develop new services quickly using these tools. And, you know, I think, you know, in addition to that, we're just running as fast as we can to roll out, you know, new agents across the enterprise, new tools. And it's, you know, especially for a small team like the one we've got at Snap, this is just a massive force multiplier. And I think really will help accelerate, you know, a lot of the creative vision we have in terms of turning it into reality.

Thank you. Our last question comes from Benjamin Black with Deutsche Bank. You may proceed.

Thanks for taking my question. And, you know, can you talk about the decision to moderate infrastructure spending at a time when others are ramping spend to drive ad performance? Was there sort of slack in the system? Maybe just talk us through that decision.

Hey, it's a great question. Thanks for asking it. I think, you know, the first thing I would say, just for context, the big driver in the ramp of infrastructure investment over the last couple of years has been a really significant growth in our ML and AI investment. And that was to both support the rebuild of the ad platform and the DR advertising business, and also to support the content business and ranking and personalization and all of the work that we've done there. And I think I would say, first and foremost, we intend to continue to invest pretty heavily there. And so that's not an area, you know, focused for pulling back. You know, as it pertains to infrastructure specifically, there are really two big catalysts where we see a lot of opportunity and are already making progress in terms of driving, you know, margin efficiency for the business and margin expansion. The first there is just our investments in how we handle cost to serve and getting that in a place where we're calibrating that better relative to the monetization potential of each of the markets in which we're operating. And there's a lot we can do to optimize that. And that's really about the theme that we've been talking about in terms of getting to profitable growth. And so translating that into the growth and infrastructure really being keyed in against the growth in monetization. The other real opportunity we see here is to take some of the infrastructure things that are costs right now and turn them into revenue generating investments. And so I think the recent launch of the memory storage plans is a great example of that, where we can take a cost and not only find ways to make it more efficient, but then also turn it into a revenue generating source of top line growth, which is going to help with even further margin expansion. So a lot of this is about efficiency. A lot of it is about being really sensible about our cost to serve relative monetization central markets and then scaling efficiently. But those investments in AI and ML will continue to be really important to the performance of the business in both the ads and the content side. So hopefully that gives a little bit more context there. Thanks for asking.

This concludes our question and answer session as well as SNAP Inc.'s fourth quarter 2025 earnings conference call. Thank you for attending today's session. You may now disconnect.