Snap Q1 Earnings Miss on ARPU as Perplexity Deal Collapses

CNBC reported Wednesday that Snap shares dropped roughly 4% in after-hours trading after the social media company posted first-quarter results and disclosed that its high-profile Snap Perplexity deal had quietly dissolved. Cautious second-quarter guidance added to investor unease.

Revenue Hits the Mark but ARPU Disappoints

Snap’s first-quarter revenue reached $1.53 billion, precisely matching Wall Street’s consensus forecast. Net losses narrowed 36% year-over-year to $89 million, an improvement CEO Evan Spiegel framed as evidence of operational progress. Global daily active users climbed to 483 million, topping the 475.6 million analysts had projected. Average revenue per user landed at $3.17, however, slightly below the $3.20 estimate. Large North American advertisers continued to weigh on ad growth during the period, though Spiegel said the company was beginning to see early signs of recovery in that segment.

The Perplexity Partnership Is Over

The most closely watched disclosure was the collapse of the Snap Perplexity deal. Snap had announced the arrangement in November alongside its third-quarter results, valuing it at $400 million and calling it a meaningful contributor to 2026 revenue. Snap’s investor letter confirmed the two companies “amicably ended the relationship” before the quarter closed. The company’s Q2 guidance explicitly assumes zero revenue contribution from Perplexity. Snap shares had jumped 15% when the deal was first announced, making the reversal a notable setback to the bull case.

Layoffs and an AI Pivot Set the Stage

The earnings came weeks after Snap disclosed plans to cut approximately 16% of its workforce and cancel roughly 300 open roles. Management framed those moves as part of a broader shift toward what it called an AI-driven transformation of the business. That restructuring context matters for reading the cautious tone in Wednesday’s letter.

Middle East Uncertainty Shadows Q2

Snap guided second-quarter revenue of $1.52 billion to $1.55 billion. The midpoint of that range sits roughly in line with consensus estimates near $1.54 billion. Yet the company warned that its forecast assumes advertising conditions across the Middle East remain broadly stable relative to the weakness observed in March and April. Snap cautioned that the trajectory of the region’s geopolitical situation remains uncertain, a hedge that echoes pressure points flagged by peers across the digital ad market this earnings cycle.

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