Snap issues cautious guidance as Perplexity deal expires, Middle East ‘geopolitical situation’ causes uncertainty

Snap shares fell nearly 4% in extended trading after the company reported first-quarter earnings on Wednesday and gave cautious sales guidance while revealing it no longer has a deal with AI maker Perplexity.

Here’s how the company fared compared to Wall Street’s expectations:

• Earnings per share: Loss of 5 cents. That number is not comparable to analyst estimates.
• Net worth: $1.53 billion vs. $1.53 billion is expected, according to LSEG
• Active users worldwide: 483 million vs. 475.6 million expected, according to StreetAccount
• Global average revenue per user, or ARPU: $3.17 vs. $3.20 expected, according to StreetAccount

Snap’s first-quarter sales rose 12% year over year and its net loss was $89 million, representing a 36% decrease from $139.6 million a year ago.

The company said in a letter to investors that “major advertisers in North America remained the wind in advertising growth” in the first quarter, and although the company is “not satisfied with that result,” “it is beginning to see encouraging signs that this part of the business is improving.”

Daily active users worldwide, or DAU, rose 5% year over year, which the company attributed to new product updates related to its digital lens filters and Snap Map feature, among others. The company said in February that its global DAU fell by 3 million in the quarter due to a reduction in marketing spend and the impact of a younger social media activity in Australia.

“In Q1, we returned to daily active user growth, accelerated revenue growth, expanded margins, and generated strong free cash flow,” Snap CEO Evan Spiegel said in a statement.

Snap said second-quarter sales would be $1.52 billion to $1.55 billion. The midpoint of that range is roughly in line with analyst estimates of $1.54 billion.

The company said in an investor note that its sales guidance “does not take into account the contribution from Perplexity as we quietly terminated the partnership in Q1,” referring to the $400 million deal it announced in November for the AI ​​startup. Snap shares jumped 15% after the company disclosed the Perplexity deal as part of its third-quarter earnings, saying at the time that “Revenue from the partnership is expected to begin contributing in 2026.”

Tech newsletter Sources first reported that Snap’s deal with Perplexity fell through.

Snap also said in a letter that its second-quarter revenue guidance “assumes that the operating environment in the Middle East region remains unchanged from the magnitude of the headwinds we experienced in March and April.” Nevertheless, Snap warned “that the trajectory of the geopolitical situation in the region is uncertain.”

The company said in April it would lay off about 16% of its workforce and cut 300 open positions, as it moves toward an “AI-driven transformation.”

Pinterest reported its latest quarterly earnings on Monday, which hit both highs and lows, but the company’s chief financial officer, Julia Donnelly, told analysts that “major retailers remain a headwind for growth” as they bear the brunt of President Donald Trump’s tough spending.

Reddit reported last Thursday its first-quarter earnings in which revenue for the period rose 69% year-over-year to $663 million, with CEO Steve Huffman telling analysts it had marked seven straight quarters of sales growth of more than 60%.

Meta and Alphabet also reported their latest quarterly earnings last Wednesday where both beat sales. While both online advertising giants also said they plan to increase spending this year on AI-related infrastructure, investors reacted most favorably to Alphabet, with its stock rising while Meta fell.

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