Key Takeaways:
- S&P Global upgraded Snap's issuer credit rating to BB- from B+
- The positive outlook signals potential for further upgrade within 12 months
- Snap targets more than $500 million in annualized cost savings in H2 2026
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S&P Global lifts Snap to BB- as cost cuts strengthen credit
S&P Global Ratings raised Snap Inc.'s issuer credit rating to BB- from B+ with a positive outlook on Wednesday, citing the social media company's improving financial profile and cost reduction efforts.
"This upgrade reflects the progress we are making to strengthen Snap's financial profile while continuing to invest in our long-term growth opportunities," Doug Hott, Chief Financial Officer of Snap Inc., said.
S&P cited lower adjusted gross leverage, improved free operating cash flow to debt, expected revenue growth from subscriptions and newer monetization initiatives, and Snap's cost savings program as drivers. Snap reported first-quarter revenue of $1.53 billion, up 12% year-over-year, with adjusted EBITDA of $233 million and free cash flow of $286 million. The company's net loss narrowed to $89 million from $305 million a year earlier.
The upgrade reduces Snap's borrowing costs and signals improving financial health for the company, which operates the Snapchat messaging app and the Specs computing hardware unit. S&P's positive outlook suggests a further upgrade is possible within 12 months if Snap executes its cost reduction plan, which targets more than $500 million in annualized savings in the second half of 2026.
The ratings agency also upgraded Snap's issue-level ratings on its unsecured notes to BB- from B+. Snap's other revenue, which includes subscription services and hardware sales through its Specs subsidiary, grew 87% year-over-year to $285 million in the first quarter. Operating cash flow reached $327 million during the period.
The upgrade positions Snap closer to investment-grade status, potentially broadening its investor base to include institutional funds with credit rating mandates. Investors will watch Snap's second-quarter earnings for evidence that its cost savings program is on track and that revenue growth is accelerating across both its core advertising business and newer subscription offerings.
This article is for informational purposes only and does not constitute investment advice.
