Snap Stock Drops 10% as Perplexity Deal Collapses and Outlook Disappoints

TLDR

• Snap stock fell nearly 10% in premarket trading after Q1 earnings
• Revenue rose 12% YoY to $1.53 billion, beating estimates slightly
• The $400 million Perplexity AI deal was terminated in Q1
• Middle East conflict cut March revenue by an estimated $20–$25 million
• Q2 revenue guidance midpoint of $1.535 billion came in just below analyst consensus

Snap (SNAP) stock fell nearly 10% in premarket trading Thursday after the company posted Q1 results that beat estimates but delivered cautious guidance and confirmed the end of its $400 million deal with AI startup Perplexity.

Snap Inc., SNAP

The stock’s drop came despite a solid quarter on paper. Revenue climbed 12% year-over-year to $1.53 billion, just ahead of the $1.52 billion Wall Street had penciled in. The net loss narrowed 36% to $89 million, and adjusted EBITDA hit $233.3 million, well above the $212 million analysts expected.

Earnings per share came in at a loss of $0.05, better than the projected loss of $0.08.

Global daily active users rose 5% year-over-year to 483 million, topping the 475.6 million expected. Monthly active users reached 956 million.

Free cash flow jumped 150% year-over-year to $286 million, up from $114 million in the same period last year.

Middle East Conflict Weighs on Ad Revenue

Advertising revenue grew 3% to $1.24 billion, driven by direct response advertising. But Snap flagged that the conflict in the Middle East cost the company roughly $20 million to $25 million in March revenue alone.

Perplexity Deal Collapses

Snap confirmed it ended its $400 million partnership with Perplexity AI during Q1. The deal, announced in November 2025, had sent Snap stock up 15% at the time, with revenue contributions expected to begin in 2026.

Analysts at Wolfe Research noted that while the Perplexity deal is off, Snap has not ruled out partnerships with other AI models or agents for platform distribution.

For Q2, Snap guided revenue in the range of $1.52 billion to $1.55 billion. The midpoint of $1.535 billion came in just below the analyst consensus of $1.54 billion.

The company also expects adjusted EBITDA of $175 million to $200 million in Q2, along with pre-tax restructuring charges of $95 million to $130 million tied to its recent organizational overhaul — most of which will land in Q2.

Barclays analyst Ross Sandler said there are “greenshoots appearing” in Snap’s ad business, though it continues to lag industry average growth. He noted some of the Q2 improvement reflects easy comparisons from ad auction issues a year ago.

In April, Snap said it would cut about 16% of its workforce and eliminate 300 open positions as part of a broader “AI-driven transformation.”

CEO Evan Spiegel pointed to investment in Specs, the company’s smart glasses platform, as a long-term focus area.

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