Snap Inc. saw its shares dip approximately 4% in extended trading after the company released its first-quarter earnings on Wednesday, presenting a mixed financial picture and offering conservative sales guidance. The social media giant also disclosed the amicable termination of its $400 million deal with generative AI startup Perplexity and cited the “geopolitical situation” in the Middle East as a source of uncertainty impacting its outlook.
For the first quarter, Snap reported revenue of $1.53 billion, meeting Wall Street expectations. Global daily active users (DAU) reached 483 million, surpassing analysts’ estimates of 475.6 million. However, global average revenue per user (ARPU) came in slightly below expectations at $3.17 against an anticipated $3.20. The company’s sales increased by 12% year-over-year, and its net loss narrowed by 36% to $89 million from $139.6 million in the prior year.
Despite the growth in DAU, which Snap attributed to updates in features like Lenses and Snap Map, the company noted that “large advertisers in North America remained a headwind to advertising growth.” CEO Evan Spiegel expressed dissatisfaction with this outcome but highlighted “encouraging signs that this part of the business is improving.” He further stated, “In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow.”
The previously announced $400 million partnership with Perplexity, expected to contribute revenue starting in 2026, has now concluded. Snap’s second-quarter sales guidance, projected between $1.52 billion and $1.55 billion, explicitly “assumes no contribution from Perplexity.” The company’s Q2 outlook also factors in the “operating environment in the Middle East region,” cautioning that the “trajectory of the geopolitical situation in the region is uncertain,” reflecting headwinds experienced in March and April.
This financial update follows Snap’s announcement in April of a 16% workforce reduction as it pivots towards an “AI-driven transformation.” The broader tech landscape has seen varied results, with Pinterest beating expectations, Reddit reporting a 69% revenue surge, and both Meta and Alphabet surpassing sales estimates. While Meta’s stock dipped despite plans for increased AI spending, Alphabet’s shares rose, indicating investor preference.
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