Key Takeaways
- Shares of Snap declined approximately 10% during premarket hours following first-quarter results
- First-quarter revenue increased 12% from the prior year to $1.53 billion, marginally surpassing projections
- Partnership with Perplexity AI worth $400 million was dissolved during the first quarter
- Geopolitical tensions in the Middle East reduced March advertising revenue by approximately $20–$25 million
- Second-quarter revenue forecast at the midpoint of $1.535 billion trails analyst expectations slightly
Shares of Snap (SNAP) tumbled nearly 10% in premarket hours Thursday following the social media company’s first-quarter earnings report, which included solid results but tempered forward guidance and confirmation that its high-profile $400 million agreement with artificial intelligence company Perplexity has been scrapped.
The sharp decline occurred despite what appeared to be respectable quarterly performance. First-quarter revenue advanced 12% compared to the same period last year, reaching $1.53 billion and narrowly exceeding Wall Street’s forecast of $1.52 billion. The company’s net loss improved by 36% to $89 million, while adjusted EBITDA totaled $233.3 million, significantly outpacing analyst predictions of $212 million.
The company reported a loss per share of $0.05, 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, surpassing the expected 475.6 million. The company also reported 956 million monthly active users.
Cash flow from operations on a free cash basis surged 150% year-over-year to $286 million, compared with $114 million during the corresponding quarter of the previous year.
Geopolitical Tensions Impact Advertising Business
Advertising revenue expanded 3% to $1.24 billion, primarily fueled by direct response advertising formats. However, Snap disclosed that ongoing military 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 projections incorporate the assumption that regional operating conditions will remain comparable to the challenges experienced throughout March and April, though the company cautioned that “the trajectory of the geopolitical situation in the region is uncertain.”
Large-scale advertisers in North America continued to represent a challenge for growth momentum. The company stated it is “not satisfied with that outcome” while expressing optimism about “encouraging signs” suggesting improvement in this advertising segment.
$400 Million AI Partnership Terminated
The Snapchat parent confirmed it dissolved its $400 million collaboration with Perplexity AI during the first quarter. Originally unveiled in November 2025, the announcement had initially propelled Snap shares up 15%, with revenue from the partnership anticipated to commence in 2026.
The company’s shareholder communication stated that second-quarter projections “assumes no contribution from Perplexity as we amicably ended the relationship in Q1.”
Wolfe Research analysts observed that despite the Perplexity arrangement falling through, Snap remains open to exploring distribution partnerships with alternative AI models or intelligent agents.
For the upcoming second quarter, Snap projected revenue between $1.52 billion and $1.55 billion. The $1.535 billion midpoint falls marginally short of the $1.54 billion analyst consensus estimate.
Management also anticipates adjusted EBITDA ranging from $175 million to $200 million in the second quarter, alongside pre-tax restructuring expenses of $95 million to $130 million related to a recent organizational restructuring—the majority of which will be recognized in the current quarter.
Barclays analyst Ross Sandler commented that “greenshoots appearing” in Snap’s advertising operations suggest potential improvement, though performance continues trailing broader industry growth rates. He observed that some second-quarter gains reflect easier year-over-year comparisons stemming from ad auction technical challenges experienced twelve months ago.
Last month, Snap announced plans to reduce its workforce by approximately 16% while eliminating 300 unfilled positions as component of an extensive “AI-driven transformation” initiative.
Chief Executive Evan Spiegel highlighted continued investment in Specs, the company’s augmented reality smart glasses platform, as a strategic priority for long-term growth.
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