Snap Q1 Earnings Miss Guidance After Perplexity Deal Collapses

CNBC reported Wednesday that Snap delivered mixed first-quarter results and issued cautious Snap guidance for the current quarter. The company also disclosed that its partnership with generative AI startup Perplexity has ended.

Shares of Snap dropped roughly 4% in after-hours trading following the announcement.

Q1 Results Show Growth but Pressure Persists

Snap posted first-quarter revenue of $1.53 billion, matching analyst expectations compiled by LSEG. The company reported a net loss of $89 million, a 36% improvement from the year-ago period. Global daily active users reached 483 million, topping the 475.6 million analysts had forecast.

Average revenue per user came in at $3.17, slightly below the $3.20 estimate. CEO Evan Spiegel said the company returned to daily active user growth, accelerated revenue, expanded margins, and generated strong free cash flow during the quarter.

Despite those wins, Snap acknowledged that large North American advertisers continued to weigh on advertising growth in the period.

The Perplexity Collapse and What It Means

Snap’s second-quarter Snap guidance calls for revenue between $1.52 billion and $1.55 billion. The midpoint sits near the analyst consensus of $1.54 billion. However, the company stated that figure assumes zero contribution from Perplexity.

Snap had announced a $400 million deal with Perplexity in November 2025. At the time, management said Perplexity revenue would begin flowing in 2026. Snap’s stock surged 15% when that partnership was first disclosed. The company said the two sides parted ways amicably during Q1.

Background: Layoffs and a Difficult Advertising Market

Snap’s challenges predate this quarter. In April, the company announced it would cut approximately 16% of its workforce and eliminate 300 open roles. Management framed those moves as part of a broader push toward an AI-driven transformation of its business.

User growth had also faltered recently. In February, Snap disclosed a sequential decline of 3 million daily active users, blaming reduced marketing spend and the impact of Australia’s social media age restrictions.

Middle East Risk Adds Another Layer of Uncertainty

Beyond the Perplexity loss, Snap flagged a new geographic concern. The company said its Q2 revenue forecast assumes the advertising environment across the Middle East stays roughly consistent with the headwinds it encountered in March and April. Management cautioned that the trajectory of regional geopolitical conditions remains uncertain.

Social media peers also flagged advertiser softness this earnings season. Pinterest’s finance chief noted large retailers pulled back due to tariff pressures, while Reddit reported a 69% revenue surge driven by different advertiser dynamics.

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