SANTA MONICA, California, May 7, 2026, 03:06 PDT
Snap Inc. dropped 7% after hours as the company revealed its $400 million AI partnership with Perplexity is off, and said ongoing Middle East violence weighed on first-quarter ad sales—even as revenue climbed faster and losses shrank. The scrapped deal, intended to integrate Perplexity’s answer engine into Snapchat Chat, failed to offset the ad hit.
Why does it matter? Snap’s comeback depends on winning back North American ad dollars and nudging more users toward paid extras like subscriptions, storage, and other non-ad services. The company flagged ongoing weakness among big advertisers in North America. Still, non-ad revenue—mainly from Snapchat+ subscriptions, Memories Storage, and Lens+—jumped 87%, hitting $285 million.
This hits just ahead of the next regular U.S. session, with investors putting Snap up against heavyweight social ad competitors. According to Reuters, Snap is still caught in the middle—wedged between TikTok and Meta’s Instagram in a tough advertising market. The company’s ongoing push: convincing advertisers that its newer ad formats deserve more dollars.
Snap’s first-quarter revenue climbed 12% year-over-year to $1.529 billion. The company trimmed its net loss to $89 million, down from $140 million a year ago. Adjusted EBITDA moved up sharply, hitting $233 million versus $108 million. CEO Evan Spiegel pointed to a “return to growth in daily active users” and said Snap is sticking with “disciplined execution” as it continues to invest in Specs, its eyewear initiative. Snap Investor Relations
Advertising was the laggard. Snap reported ad revenue of $1.24 billion, marking a 3% rise, with direct-response campaigns—those that drive purchases, installs, or clicks—offering some lift. Still, the company flagged a $20 million to $25 million drag tied to Middle East geopolitical issues in March. Demand from big North American clients remained sluggish.
The Perplexity deal is off the table, taking a roughly $400 million AI revenue stream out of Snap’s near-term picture. According to TechCrunch, Perplexity was supposed to pay Snap that amount—cash and equity—over the course of a year. Snap now says its Q2 sales guidance no longer factors in anything from that partnership, after both sides “amicably ended” things in the first quarter. TechCrunch
Snap is looking for second-quarter revenue to land between $1.52 billion and $1.55 billion, with adjusted EBITDA falling somewhere in the $175 million to $200 million range. The company’s outlook banks on Middle East conditions not diverging much from what was seen in March and April. Still, Snap flagged the geopolitical situation there as unpredictable.
Numbers sent a mixed signal. Daily active users worldwide climbed 5% to 483 million, but in North America, that figure dropped 7% to 92 million, according to EMARKETER. Over at Reuters, they noted Snap’s average revenue per user hit $3.17—falling short of the $3.21 analyst consensus—as the company bets on faster-growing international markets that still trail in user revenue.
Snap saw its biggest non-ad revenue gains from paid products. Subscriptions, according to the company, matter strategically—they strengthen direct user ties and provide income that doesn’t swing with the ad market. Among the fresh efforts: Lens+, an AI-enhanced premium lens offering.
Costs are in the spotlight too. Back in April, Snap announced plans to trim about 1,000 jobs—roughly 16% of its full-time workforce—after Irenic Capital Management, an activist investor, called for a tighter grip on spending and improved results. The company now aims to slash annualized costs by over $500 million in the second half of 2026. But that won’t come cheap: Snap anticipates $95 million to $130 million in restructuring charges, mostly landing in the second quarter.
Snap continues to pour money into its bigger swing projects. The company said Specs are on track for a commercial debut later this year, with Spiegel positioning intelligent eyewear as a key long-range play. Snap also noted it’s deepening its work with Qualcomm on next-gen Specs hardware.
Still, there’s not much room for error in the forecast. Any deterioration in the Middle East situation could hit ad revenue harder, while a sluggish comeback from bigger North American advertisers could put Snap’s rebound to the test. The company also pointed out regulatory risks—age verification, data and privacy issues, advertising rules, and online safety concerns. Those, it warned, might drive up compliance costs and potentially impact how many people use or engage with the app.
