Key Highlights
- Snap shares declined approximately 10% during premarket hours following first-quarter earnings release
- First-quarter revenue increased 12% year-over-year, reaching $1.53 billion and surpassing Wall Street projections
- Partnership agreement with Perplexity AI valued at $400 million ended during the first quarter
- Geopolitical tensions in the Middle East resulted in approximately $20–$25 million revenue shortfall during March
- Second-quarter revenue forecast midpoint of $1.535 billion fell slightly below analyst expectations
Shares of Snap (SNAP) experienced a significant decline of approximately 10% during Thursday’s premarket session after the social media company released first-quarter results that exceeded projections while providing conservative forward guidance and announcing the termination of its partnership with AI company Perplexity.
The decline in share price occurred even as the company delivered strong quarterly performance. First-quarter revenue advanced 12% compared to the year-ago period, totaling $1.53 billion and slightly exceeding the $1.52 billion consensus estimate from Wall Street analysts. The company’s net loss improved by 36% to $89 million, while adjusted EBITDA reached $233.3 million, substantially higher than the $212 million analyst forecast.
The company reported an earnings per share loss of $0.05, representing 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 analyst predictions of 475.6 million. Monthly active users climbed to 956 million.
Free cash flow demonstrated impressive growth, surging 150% year-over-year to $286 million, compared to $114 million during the corresponding quarter last year.
Geopolitical Tensions Impact Advertising Business
Advertising revenue advanced 3% to $1.24 billion, with direct response advertising serving as the primary growth driver. However, Snap disclosed that ongoing conflict in the Middle East region reduced March revenue by an estimated $20 million to $25 million.
Management indicated that second-quarter projections incorporate the assumption that regional operating conditions will remain comparable to the challenges experienced during March and April, while cautioning that “the trajectory of the geopolitical situation in the region is uncertain.”
The company continues to face challenges with large North American advertisers. Snap acknowledged disappointment with current performance in this segment while highlighting “encouraging signs” of gradual improvement.
Partnership With Perplexity AI Terminated
The company disclosed that its $400 million collaboration with Perplexity AI concluded during the first quarter. This partnership, initially unveiled in November 2025, had triggered a 15% surge in Snap’s stock price, with anticipated revenue contributions projected to begin in 2026.
The company’s investor communication stated that second-quarter guidance “assumes no contribution from Perplexity as we amicably ended the relationship in Q1.”
Analysts from Wolfe Research observed that despite the Perplexity agreement ending, Snap remains open to exploring partnerships with alternative AI models or agents for platform distribution opportunities.
Management provided second-quarter revenue guidance ranging from $1.52 billion to $1.55 billion. The midpoint figure of $1.535 billion trails the analyst consensus estimate of $1.54 billion.
The company also projected adjusted EBITDA between $175 million and $200 million for the second quarter, alongside pre-tax restructuring charges ranging from $95 million to $130 million connected to recent organizational restructuring efforts — with the majority expected to materialize in the second quarter.
Barclays analyst Ross Sandler highlighted that “greenshoots appearing” in Snap’s advertising business remain present, though growth continues to trail industry benchmarks. He observed that some second-quarter improvement reflects favorable year-over-year comparisons due to ad auction challenges experienced during the prior year.
During April, Snap announced workforce reductions affecting approximately 16% of employees, along with the elimination of 300 unfilled positions as part of a comprehensive “AI-driven transformation” initiative.
CEO Evan Spiegel emphasized continued investment in Specs, the company’s smart glasses platform, as a strategic priority for long-term growth.
