Snap Pulls Cautious Q2 Guidance After Perplexity Deal Collapse and Middle East Headwinds

CNBC reported Wednesday that Snap delivered mixed first-quarter results while confirming its once-celebrated partnership with generative AI startup Perplexity had quietly dissolved. Shares fell roughly 4% in after-hours trading on the news.

Revenue Meets Expectations, Users Surprise to the Upside

Snap matched Wall Street’s revenue forecast precisely, posting $1.53 billion for the quarter. That figure represents 12% growth compared with the same period a year ago. Daily active users reached 483 million, topping analyst estimates of roughly 476 million, and rising 5% year over year. Net losses narrowed to $89 million from nearly $140 million in the prior-year quarter. Average revenue per user came in at $3.17, just below the $3.20 consensus estimate.

Snap CEO Evan Spiegel said the company returned to user growth, accelerated revenue expansion, and generated strong free cash flow during the quarter.

The Perplexity Deal Is Over

The Snap Perplexity deal, announced in November 2025 with a reported value of $400 million, had sent Snap shares surging 15% when it was first disclosed. Snap said at the time that revenue from the collaboration was expected to begin flowing in 2026. That projection never materialised. The company confirmed in its investor letter that the partnership ended amicably during the first quarter and carries zero contribution into its second-quarter outlook.

Middle East Uncertainty Adds Another Layer of Risk

Alongside the Perplexity exit, Snap flagged significant advertising softness tied to geopolitical instability in the Middle East. Management noted its second-quarter revenue guidance assumes conditions in that region remain no worse than what the company experienced in March and April. However, Snap cautioned that the trajectory remains uncertain, a signal that further deterioration could pressure results. Large advertisers in North America also remained a drag on growth during the first quarter, though Snap said early signs of improvement are emerging.

Layoffs and an AI Pivot Frame the Backdrop

Snap’s earnings come weeks after the company announced it would cut approximately 16% of its global workforce and close around 300 unfilled roles. Management framed those moves as part of a broader push toward an AI-driven operating model. Snap is not alone in navigating a choppy digital advertising market. Pinterest and Reddit both reported results this week, with Pinterest flagging tariff-related retailer caution and Reddit posting a 69% revenue surge.

Snap’s second-quarter revenue guidance midpoint of roughly $1.535 billion sits essentially in line with consensus estimates of $1.54 billion, leaving little room for further disappointment.

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