Will Snap sustain gross margins at or above 60% for both Q1 and Q2 2026?

The April 15 8-K reiterated the 60%+ FY2026 gross margin target. However, two headwinds specifically affect Q2: (1) the restructuring charge of $95-130M hits Q2 and may flow partially through COGS, pressuring gross margin; (2) cost savings ramp to $500M+ only in H2 2026, so Q2 still operates under the old cost structure. Q1 hitting 60% is plausible given the reiterated target and +12% revenue growth; Q2 hitting 60% is harder given the one-time restructuring flow-through. Both quarters together: ~40%.

Restructuring charges are typically reported below the gross margin line in Snap's presentation (as a distinct line item), not in COGS. If Snap presents the $95-130M as a separate charge rather than allocating it to COGS, Q2 gross margin is protected. In that accounting treatment, both quarters at 60%+ become much more plausible. Still, Q4 2025 was 59% and Q1 2026 revenue of $1.529B (+12%) should help operating leverage. Probability meaningfully higher if charges are reported separately.

The market requires BOTH Q1 AND Q2 at 60%+, which is a strict bar. Q1 is marginally likely given the reaffirmed FY target and revenue beat; Q2 is compressed by restructuring timing and the fact that cost savings don't materialize until H2. The committee's prior 0.45 estimate appears slightly too generous given Q2 stress; the April 15 action is directionally supportive but the cost-savings ramp profile doesn't help Q2 specifically.

April 15 action is marginally supportive. Revenue beat implies operating leverage; FY target reiterated implies Q1/Q2 trajectory. But Q2 hit by one-time restructuring charges ($95-130M pre-tax) that may or may not flow through COGS depending on how Snap categorizes them. Historically Snap treats restructuring as a separate line — but investors and financial databases sometimes compute gross margin inclusive of such charges. Resolution ambiguity on reporting method is a real consideration.

Q1 at 60%+ is roughly 60-65% likely given the revenue beat and reaffirmed target. Q2 at 60%+ with fresh restructuring is maybe 55-60% likely (restructuring creates noise, savings not yet in run-rate). Joint probability if independent: ~35-40%. But they are positively correlated (same operating model), so joint is closer to 40%.

Management has reiterated the 60%+ target and the 8-K explicitly lists 'Catalysts to 60%+ Gross Margins' (monetizable growth, higher-margin placements, subscriptions). This is stronger guidance than in Q4. However, Q4 2025 was 59%, and hitting 60.0%+ in Q1 requires a 100 bp expansion sequentially, which is not guaranteed. Probability ~38% for both quarters.

60%+ target reiterated. Q1 beat on revenue supports operating leverage. Q2 restructuring timing creates noise. Base case: Q1 just hits 60.0%, Q2 touches 59.5-60.5% range. Given the strict 60%+ bar for both, probability ~40%.

Modest upgrade from prior 0.45 estimate. The action clarifies cost trajectory but Q2 specifically sees the one-time charge hit. Neither major driver points strongly either way.

Reaffirmed target + revenue beat slightly positive. Q2 restructuring slightly negative. Roughly offsetting. Probability ~40%.