Key Takeaways
- Snap shares declined approximately 10% in early trading following first-quarter earnings release
- First-quarter revenue increased 12% year-over-year to $1.53 billion, narrowly exceeding projections
- Partnership with Perplexity AI worth $400 million was dissolved during the first quarter
- Geopolitical tensions in the Middle East resulted in approximately $20–$25 million in lost March advertising revenue
- Second-quarter revenue forecast midpoint of $1.535 billion falls slightly short of Wall Street expectations
Shares of Snap (SNAP) tumbled nearly 10% during Thursday’s premarket session following the social media company’s first-quarter earnings report, which revealed the termination of its major partnership with artificial intelligence company Perplexity alongside conservative forward-looking guidance, despite exceeding quarterly expectations.
The sharp decline occurred even as the company delivered respectable quarterly performance metrics. First-quarter revenue advanced 12% compared to the prior-year period, reaching $1.53 billion and edging past the $1.52 billion consensus forecast from analysts. The company’s net loss contracted by 36% to $89 million, while adjusted EBITDA totaled $233.3 million, significantly surpassing analyst projections of $212 million.
The loss per share of $0.05 represented an improvement over the anticipated loss of $0.08.
The platform’s global daily active user base expanded 5% year-over-year to 483 million users, exceeding forecasts of 475.6 million. Monthly active users climbed to 956 million.
Free cash flow surged 150% year-over-year to $286 million, compared with $114 million during the comparable quarter last year.
Geopolitical Tensions Impact Advertising Business
Advertising revenue increased 3% to $1.24 billion, propelled by direct response advertising products. However, Snap disclosed that ongoing geopolitical conflict in the Middle East resulted in approximately $20 million to $25 million in lost revenue during March alone.
Management indicated that its second-quarter forecast incorporates the assumption that regional operating conditions will remain comparable to the challenges experienced throughout March and April, while cautioning that “the trajectory of the geopolitical situation in the region is uncertain.”
Major North American advertisers continued to represent a weakness for growth momentum. The company expressed dissatisfaction with these results but noted it is beginning to observe “encouraging signs” of recovery in this segment.
Major AI Partnership Terminated
Perplexity AI and Snap mutually ended their $400 million collaboration agreement during the first quarter, the company disclosed. Originally unveiled in November 2025, the announcement had initially propelled Snap shares upward by 15%, with anticipated revenue contributions scheduled to commence in 2026.
The company’s shareholder communication confirmed that second-quarter guidance “assumes no contribution from Perplexity as we amicably ended the relationship in Q1.”
Wolfe Research analysts observed that despite the Perplexity arrangement ending, Snap remains open to potential collaborations with alternative AI platforms or agents for distribution purposes.
For the second quarter, Snap projected revenue between $1.52 billion and $1.55 billion. The $1.535 billion midpoint trails the $1.54 billion analyst consensus estimate.
The company also anticipates adjusted EBITDA ranging from $175 million to $200 million during the second quarter, alongside pre-tax restructuring expenses between $95 million and $130 million connected to its recent corporate reorganization — with the majority expected to be recorded in the second quarter.
Barclays analyst Ross Sandler commented that “greenshoots appearing” are visible within Snap’s advertising operations, although growth continues trailing industry benchmarks. He indicated that some second-quarter improvement reflects favorable year-over-year comparisons following ad auction challenges from the previous year.
In April, Snap announced plans to reduce its workforce by approximately 16% and eliminate 300 unfilled positions as part of a comprehensive “AI-driven transformation” initiative.
Chief Executive Officer Evan Spiegel highlighted investment in Specs, the company’s smart glasses technology, as a strategic priority for long-term development.
