Snap Q1 Earnings Miss Guidance Mark as Perplexity Deal Collapses

CNBC reported Wednesday that Snap earnings for the first quarter met Wall Street’s revenue expectations but sent shares roughly 4% lower in after-hours trading, after the company disclosed the collapse of its partnership with generative AI startup Perplexity and issued cautious forward guidance.

Revenue Matches Forecasts but Caveats Mount

Snap posted first-quarter revenue of $1.53 billion, matching analyst estimates compiled by LSEG. The figure represented 12% growth year-over-year. Net losses narrowed to $89 million, down 36% from the same period a year earlier. Global daily active users reached 483 million, ahead of the 475.6 million consensus. Average revenue per user came in at $3.17, just below the $3.20 estimate. CEO Evan Spiegel highlighted returning user growth, margin expansion, and strong free cash flow as constructive signs for the business.

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The Perplexity Partnership Is Over

The most closely watched disclosure involved Snap’s now-defunct agreement with Perplexity. Snap had announced that $400 million deal in November 2025 alongside its third-quarter results. Shares had jumped 15% on that news at the time. The company’s investor letter confirmed the two sides “amicably ended the relationship” during the first quarter. Second-quarter guidance explicitly excludes any revenue contribution from the AI startup. Reports that the arrangement had unraveled surfaced before Wednesday’s earnings release.

Also Read: Snap Announces 16% Workforce Reduction in AI Pivot

Background: Advertiser Headwinds and Layoffs Preceded the Report

Snap entered the quarter carrying significant operational baggage. In April, the company announced plans to cut roughly 16% of its global workforce and cancel hiring for around 300 open roles. Management framed the restructuring as part of a broader push toward an AI-driven product strategy. User growth had also wobbled earlier in the year. A 3 million quarter-over-quarter DAU decline in the fourth quarter of 2025 was attributed partly to reduced marketing investment and Australia’s new social media age restrictions.

Middle East Uncertainty Clouds the Outlook

Second-quarter revenue guidance of $1.52 billion to $1.55 billion sits roughly in line with the $1.54 billion analyst consensus. But Snap attached notable qualifiers. The company said its outlook assumes advertising conditions across the Middle East remain broadly unchanged from the headwinds seen in March and April. It added that the trajectory of the geopolitical situation there remains uncertain. North American large advertisers were also cited as a persistent drag on growth, though management described early signs of improvement in that segment. Peer platforms including Pinterest have flagged similar pressure as advertisers absorb the impact of elevated tariffs.

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