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.
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.
SNAP $SNAP JUST POSTED A Q1 EPS MISS AND ENDED ITS PERPLEXITY DEAL
Q1 results:
• Revenue: $1.53B vs $1.53B est (in-line)
• EPS: -$0.05 vs $0.09 est
• DAU: 483MQ2 guide:
• Revenue: $1.52-1.55B vs $1.54B est
• Adj EBITDA: $175-200M vs $226.1M estPlus: Snap "amicably… pic.twitter.com/lPradtLEjc
— WOLF (@WOLF_Financial) May 6, 2026
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.
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.
The company said its Q2 guidance assumes the operating environment in the region stays consistent with the headwinds seen in March and April, while also warning that “the trajectory of the geopolitical situation in the region is uncertain.”
Large advertisers in North America also remained a drag on growth. Snap acknowledged it is “not satisfied with that outcome” but said it is starting to see “encouraging signs” of improvement in that part of the business.
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.
The investor letter stated that Q2 guidance “assumes no contribution from Perplexity as we amicably ended the relationship in Q1.”
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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