Key Takeaways
- Snap (SNAP) shares plummeted approximately 10% during premarket hours following Q1 earnings release
- First-quarter revenue increased 12% year-over-year, reaching $1.53 billion and narrowly surpassing projections
- Company terminated its $400 million partnership with Perplexity AI in the first quarter
- Geopolitical tensions in the Middle East resulted in approximately $20–$25 million in lost ad revenue during March
- Second-quarter revenue forecast midpoint of $1.535 billion fell short of Wall Street expectations
Shares of Snap (SNAP) tumbled nearly 10% in Thursday’s premarket session following the social media company’s first-quarter earnings report, which featured better-than-expected results but was overshadowed by the termination of a major AI partnership and conservative forward guidance.
The sharp decline occurred despite the company delivering respectable quarterly performance. First-quarter revenue advanced 12% from the prior-year period to $1.53 billion, marginally exceeding the $1.52 billion consensus forecast from Wall Street analysts. The company’s net loss contracted 36% to $89 million, while adjusted EBITDA reached $233.3 million, significantly surpassing the $212 million analyst projection.
The company reported an adjusted loss per share 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, beating expectations of 475.6 million. Total monthly active users climbed to 956 million.
Free cash flow surged 150% compared to the same quarter last year, jumping to $286 million from $114 million.
Geopolitical Tensions Impact Advertising Performance
Advertising revenue increased 3% to $1.24 billion, primarily fueled by direct response advertising campaigns. However, Snap disclosed that escalating conflict in the Middle East resulted in an estimated $20 million to $25 million reduction in March advertising revenue.
According to the company’s investor communication, Q2 projections incorporate the assumption that regional operating conditions will remain comparable to the challenges experienced throughout March and April. Management cautioned that “the trajectory of the geopolitical situation in the region is uncertain.”
The company’s performance with major North American advertisers continued to underperform expectations. While Snap acknowledged dissatisfaction with these results, the company indicated it is beginning to observe “encouraging signs” suggesting improvement in this segment.
$400 Million AI Partnership Terminated
The company disclosed that it mutually terminated its $400 million collaboration with Perplexity AI during the first quarter. Initially announced in November 2025, the partnership had triggered a 15% surge in Snap’s stock price, with anticipated revenue contributions scheduled to commence in 2026.
The company’s shareholder letter explicitly stated that Q2 projections “assumes no contribution from Perplexity as we amicably ended the relationship in Q1.”
Wolfe Research analysts observed that despite the dissolved Perplexity arrangement, Snap remains open to exploring distribution partnerships with alternative AI models and platforms.
For the second quarter, Snap projected revenue between $1.52 billion and $1.55 billion. The guidance midpoint of $1.535 billion fell marginally below the Street consensus of $1.54 billion.
Management also forecast adjusted EBITDA ranging from $175 million to $200 million for Q2, alongside pre-tax restructuring expenses between $95 million and $130 million connected to the company’s recent organizational restructuring — with the majority expected to materialize in the second quarter.
Barclays analyst Ross Sandler commented that “greenshoots appearing” in Snap’s advertising business are becoming visible, although growth continues trailing industry benchmarks. He highlighted that some second-quarter improvement reflects favorable year-over-year comparisons stemming from ad auction challenges experienced twelve months earlier.
In April, the company announced workforce reductions affecting approximately 16% of employees and the elimination of 300 unfilled positions as part of an “AI-driven transformation” initiative.
Chief Executive Evan Spiegel emphasized ongoing investment in Specs, the company’s augmented reality smart glasses platform, as a strategic long-term priority.
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