Snap (SNAP) Stock Plunges 10% After Perplexity Partnership Ends and Weak Forecast

Key Highlights

• Shares of Snap declined approximately 10% during premarket hours following first-quarter results
• First-quarter revenue increased 12% compared to last year, reaching $1.53 billion and slightly surpassing expectations
• The company’s $400 million partnership with Perplexity AI was cancelled during the first quarter
• Geopolitical tensions in the Middle East resulted in an estimated $20–$25 million revenue shortfall in March
• Second-quarter revenue forecast midpoint of $1.535 billion falls marginally short of Wall Street projections

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 revealed the termination of a major AI partnership and provided underwhelming forward guidance.

Snap Inc., SNAP

The sharp decline occurred despite the company delivering respectable quarterly performance metrics. First-quarter revenue advanced 12% from the prior-year period to $1.53 billion, marginally exceeding Wall Street’s forecast of $1.52 billion. The company’s net loss improved by 36% to $89 million, while adjusted EBITDA reached $233.3 million, comfortably surpassing analyst predictions of $212 million.

The company posted an adjusted loss of $0.05 per share, outperforming the consensus estimate of a $0.08 loss.

The platform’s global daily active user base expanded 5% year-over-year to 483 million, exceeding analyst forecasts of 475.6 million. The company’s monthly active user count climbed to 956 million.

Free cash flow surged 150% compared to the year-ago quarter, climbing to $286 million from $114 million.

Geopolitical Tensions Impact Advertising Performance

Advertising revenue posted a 3% increase to $1.24 billion, primarily fueled by direct response advertising. However, Snap disclosed that ongoing conflict in the Middle East resulted in approximately $20 million to $25 million in lost revenue during March alone.

Partnership with Perplexity AI Terminated

Snap disclosed that it mutually terminated its $400 million collaboration with Perplexity AI during the first quarter. The agreement, initially unveiled in November 2025, had triggered a 15% surge in Snap’s stock price, with anticipated revenue contributions scheduled to commence in 2026.

Wolfe Research analysts observed that despite the Perplexity partnership ending, Snap remains open to exploring distribution agreements with alternative AI models or intelligent agents.

For the second quarter, Snap projected revenue between $1.52 billion and $1.55 billion. The $1.535 billion midpoint trails the analyst consensus estimate of $1.54 billion.

Management also forecast adjusted EBITDA in the range of $175 million to $200 million for the second quarter, alongside pre-tax restructuring expenses of $95 million to $130 million connected to the company’s recent organizational restructuring — with the majority expected to be recognized in the second quarter.

Barclays analyst Ross Sandler observed that “greenshoots appearing” in Snap’s advertising business, despite continued underperformance relative to industry benchmarks. He suggested that some second-quarter improvements reflect favorable year-over-year comparisons following ad auction challenges experienced last year.

In April, Snap announced plans to reduce its workforce by approximately 16% and eliminate 300 unfilled positions as part of a comprehensive “AI-driven transformation.”

CEO Evan Spiegel highlighted continued investment in Specs, the company’s smart glasses initiative, as a strategic priority for long-term growth.

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