Snap issues cautious guidance after Perplexity deal ends; Middle East tensions cloud outlook

• The company's $400 million partnership with Perplexity, announced in November 2024 with revenue expected to begin in 2026, ended amicably in Q1 with no contribution to future guidance
• Q2 revenue guidance of $1.52-$1.55 billion assumes Middle East geopolitical headwinds remain consistent with March-April levels, though trajectory remains uncertain
• Global daily active users reached 483 million (beating estimates of 475.6 million), up 5% year-over-year, while net loss narrowed 36% to $89 million from $139.6 million in the prior year

Snap Q1 Earnings Summary

Financial Performance:

Snap reported mixed Q1 results with revenue of $1.53 billion, meeting expectations and representing 12% year-over-year growth. The company posted a net loss of $89 million, narrowing 36% from the prior year's $139.6 million loss. EPS data was not disclosed in comparison figures.

User Metrics:

Global daily active users (DAU) reached 483 million, beating estimates of 475.6 million and rising 5% year-over-year. However, average revenue per user (ARPU) of $3.17 slightly missed expectations of $3.20. DAU growth was attributed to product updates including Lenses filters and Snap Map features.

Key Developments:

The company ended its partnership with AI startup Perplexity in Q1, eliminating the expected $400 million deal announced in November. The relationship concluded "amicably," but removes anticipated 2026 revenue contributions.

In April, Snap announced layoffs affecting approximately 16% of its workforce and eliminated 300 open positions as part of an "AI-driven transformation."

Market Challenges:

Large North American advertisers remained a headwind to growth, though management noted "encouraging signs" of improvement. Middle East geopolitical tensions create uncertainty in the outlook, with Q2 guidance assuming consistent headwinds experienced in March and April.

Q2 Guidance:

Second-quarter revenue guidance of $1.52-$1.55 billion (midpoint $1.535 billion) aligns with analyst estimates of $1.54 billion, explicitly excluding any Perplexity contribution.

Sector Context:

Results mirror broader digital advertising challenges, with Pinterest citing similar pressure from large retailers impacted by tariffs, while Reddit continues strong growth at 69% year-over-year.