Snap Inc. (SNAP) shares experienced a volatile session Thursday following the release of its first-quarter earnings, which beat analyst estimates on several metrics but were overshadowed by the termination of a major AI partnership and cautious forward guidance. The social media company reported a 12% year-over-year revenue increase to $1.53 billion, slightly above the consensus estimate of $1.52 billion. Net loss narrowed 36% to $89 million, while adjusted EBITDA of $233.3 million surpassed the expected $212 million. Daily active users rose 5% to 483 million, topping the 475.6 million projection, and free cash flow surged 150% to $286 million.
Despite these strengths, Snap's stock initially fell nearly 10% in premarket trading after news that its $400 million deal with AI startup Perplexity had been "amicably ended" during the quarter. The partnership, announced in November 2025, was expected to integrate AI-powered search into Snapchat and contribute non-advertising revenue; its collapse removed a long-term growth catalyst. Additionally, the conflict in the Middle East dented advertising revenue by an estimated $20–$25 million in March, and large advertisers in North America remained a drag.
Snap's guidance for the second quarter added to the uncertainty. Revenue is projected between $1.52 billion and $1.55 billion, with a midpoint of $1.535 billion—just below the analyst consensus of $1.54 billion. Adjusted EBITDA is expected at $175–$200 million, and the company will book $95–$130 million in restructuring charges related to a workforce reduction of about 16%. However, investor sentiment shifted during the day as the quarterly beat and evidence of cost discipline gained attention. Analysts pointed to "greenshoots" in the ad business and noted that Snap's subscription revenue—under the "Other Revenue" segment—jumped nearly 87%, driven by Snapchat+. By the close, shares reflected renewed optimism, with many investors focusing on the company's improving margins and user engagement rather than the Perplexity setback.
