(Reuters) -Snap on Tuesday forecast quarterly revenue largely above estimates as efforts to revamp the ad targeting tools of its photo messaging app paid off and bolstered its results.

Shares of Snap were, however, volatile in extended trading, declining nearly 3% after surging 14% immediately after the company reported its earnings.

For the fourth quarter, the Santa Monica, California-based company now expects revenue to be between $1.32 billion and $1.38 billion. Analysts were expecting revenue of $1.33 billion.

The company, however, sees risk to its sales in the fourth quarter as the onset of a war in the Middle East could tamp down spending from a large number of brand-oriented advertising campaigns.

Revenue for the third quarter ended September rose 5% to $1.19 billion, beating analysts' expectations of $1.11 billion, according to LSEG data.

The results are welcome news for the Snapchat owner after hiccups in rolling out a new machine learning-powered technology for better targeting of ads and promotions hampered its growth in the first half of the year.

They also signal that advertisers were returning to smaller platforms such as Snapchat after leaning on the likes of Facebook-owner Meta Platforms, whose wider reach and a diverse user base are considered a safer bet in a turbulent economy.

The company said it had returned to positive revenue growth in the third quarter due to its efforts towards diversifying revenue through machine learning and Snapchat+, despite setbacks.

The social media company's subscription service, Snapchat+, which gives subscribers access to exclusive and pre-release features and costs $3.99 a month, hit more than 5 million members in the third quarter.

Daily active users on Snapchat were 406 million, beating Wall Street expectations of 405.7 million.

Snap's net loss widened to $368 million in the third quarter from $360 million a year earlier.

(Reporting by Khushi Mandowara in Bengaluru; Editing by Anil D'Silva)