Shares in the owner of Snapchat surged 21% during after-hours trading after the social media group beat Wall Street’s expectations for quarterly revenue and user growth.

Improvements to Snap’s advertising system are delivering results faster than anticipated, the company said.

Daily active users of Snapchat grew to 422 million in the first three months of the year, beating analyst expectations of 419.6 million. Revenue during the first quarter meanwhile rose 21% to $1.2bn, beating the analyst consensus estimate of $1.12bn.

Snap, based in Santa Monica, California, has long struggled to compete for advertising dollars against larger rivals like Meta Platforms, owner of Facebook and Instagram. But it has been working over the past year to improve how it targets ads to users and simplify the way people interact with the ads.

In a letter to shareholders, Snap said its business was improving faster than it expected due to the upgrades and higher demand for features that help brands drive sales or website clicks.

“The value we provide our community and advertising partners has translated into improved financial performance,” said Evan Spiegel, CEO of Snap. “Our large, growing and hard-to-reach community, brand-safe environment, and full-funnel advertising solutions have made us an increasingly important partner for businesses of all sizes.”

On Tuesday, the US Senate passed a bill that gives Chinese tech company ByteDance up to one year to divest its wildly popular video app TikTok – another of Snap’s rivals – or else the app will be banned in the US.

Snap said it expects second-quarter revenue of between $1.23bn and $1.26bn, slightly above analysts’ forecasts. The firm expects to its user base to grow to 431m.

Reuters contributed reporting