Key Takeaways
- Snap shares declined roughly 10% during premarket hours following first-quarter results
- First-quarter revenue increased 12% year-over-year to $1.53 billion, marginally exceeding projections
- Partnership with Perplexity AI worth $400 million was canceled during the first quarter
- Geopolitical tensions in the Middle East resulted in approximately $20–$25 million in lost March advertising revenue
- Second-quarter revenue forecast midpoint of $1.535 billion falls slightly short of Wall Street expectations
Shares of Snap (SNAP) tumbled nearly 10% in Thursday’s premarket session following the release of first-quarter financial results that exceeded analyst projections but were overshadowed by conservative forward guidance and the termination of a significant artificial intelligence partnership with Perplexity.
The sharp decline in the social media company’s stock occurred despite reporting fundamentally strong quarterly performance. Top-line revenue advanced 12% compared to the prior-year period, reaching $1.53 billion and slightly surpassing the Street’s $1.52 billion forecast. The company’s net loss contracted by 36% to $89 million, while adjusted EBITDA came in at $233.3 million, significantly exceeding the $212 million analyst estimate.
On a per-share basis, the company reported a loss of $0.05, outperforming the anticipated loss of $0.08.
The platform’s global daily active user base expanded 5% year-over-year to 483 million users, surpassing consensus estimates of 475.6 million. Monthly active users climbed to 956 million.
Free cash flow demonstrated remarkable improvement, surging 150% year-over-year to $286 million compared to $114 million in the corresponding quarter of the previous year.
Geopolitical Tensions Impact Advertising Business
Advertising revenue posted modest growth of 3% to reach $1.24 billion, propelled primarily by direct response advertising formats. However, Snap disclosed that ongoing geopolitical conflict in the Middle East resulted in approximately $20 million to $25 million in lost revenue during March alone.
Management indicated that second-quarter projections assume the operating conditions in the affected region will remain consistent with the challenges experienced throughout March and April, while cautioning that “the trajectory of the geopolitical situation in the region is uncertain.”
Large enterprise advertisers in North America continued to present headwinds for revenue expansion. The company acknowledged dissatisfaction with this performance but noted it is beginning to observe “encouraging signs” suggesting potential improvement in this advertising segment.
Perplexity AI Partnership Terminated
The Snapchat parent company officially confirmed the dissolution of its $400 million strategic partnership with Perplexity AI, which occurred during the first quarter. The arrangement, originally unveiled in November 2025, had initially sparked a 15% surge in Snap’s stock price, with revenue generation anticipated to commence in 2026.
The shareholder letter explicitly stated that second-quarter projections “assumes no contribution from Perplexity as we amicably ended the relationship in Q1.”
Equity analysts at Wolfe Research observed that although the Perplexity arrangement has been terminated, Snap remains open to exploring potential collaborations with alternative AI platforms or agents for distribution purposes.
For the upcoming second quarter, Snap projected revenue between $1.52 billion and $1.55 billion. The guidance midpoint of $1.535 billion trails the analyst consensus estimate of $1.54 billion.
Management also anticipates adjusted EBITDA ranging from $175 million to $200 million for the second quarter, accompanied by pre-tax restructuring expenses of $95 million to $130 million connected to the company’s recent organizational reorganization — with the majority of these charges expected to be recognized in Q2.
Barclays analyst Ross Sandler commented that “greenshoots appearing” are evident within Snap’s advertising operations, although performance continues to trail broader industry growth benchmarks. He highlighted that some second-quarter sequential improvement reflects favorable year-over-year comparisons due to advertising auction challenges encountered during the same period last year.
In April, the company announced plans to reduce its workforce by approximately 16% and eliminate 300 unfilled positions as part of an extensive “AI-driven transformation” initiative.
Chief Executive Officer Evan Spiegel emphasized continued investment in Specs, the company’s smart glasses product line, as a strategic priority for long-term growth.
