Snap shares fell about 4% after hours Wednesday. The reason isn't earnings.
It's the deal that just disappeared. In November, Snap inked a $400 million pact with AI search startup Perplexity. The stock jumped 15% on that news. Six months later, the deal is gone.
Snap said in its investor letter that the two firms "amicably ended" their relationship in Q1. The new Q2 sales guide of $1.52 billion to $1.55 billion now assumes zero dollars from Perplexity.
That deal was set to start adding to revenue in 2026. It now will not. Tech newsletter Sources first reported the deal had collapsed.
For investors, this matters. A chunk of the AI buzz priced into Snap last fall just got erased.
The original deal was supposed to bake $400 million in cash into Snap's 2026 numbers. Snap stock jumped 15% the day it was announced last fall. With the deal gone, that pop is now hard to defend.
Snap did not say who walked first. The investor letter only said the split was on good terms.
Strip out Perplexity and Snap had a fine Q1. Sales rose 12% YoY to $1.53 billion, in line with Wall Street. Net loss narrowed 36% to $89 million.
User growth went the right way. Daily active users hit 483 million, up 5% YoY. That beat the 475.6 million Wall Street wanted. Snap pointed at its Lenses filters and Snap Map updates as the drivers.
The miss came on revenue per user, at $3.17 vs. the $3.20 estimate. Snap also warned that "large advertisers in North America remained a headwind."
Other ad-driven sites told a mixed story this season. Pinterest beat top and bottom line on Monday. But CFO Julia Donnelly told analysts that "large retailers remained a headwind to growth" because of Trump tariffs.
Reddit lit up the tape. Q1 sales soared 69% YoY to $663 million. That marked its seventh straight quarter of growth above 60%, per CEO Steve Huffman.
Meta and Alphabet both beat sales last week. But Alphabet's stock rose while Meta's dropped after their results.
The read: Snap and Pinterest are stuck in the same large-advertiser slump, while AI-search names keep pulling away.
Snap also called out the Middle East as a Q2 risk. It said ad spending out of the region was weak in March and April. Translation: Snap is guiding as if that doesn't change.
The bigger picture: Snap said in April it was cutting 16% of its staff. It also pulled 300 open roles to fund what it calls an "AI-driven transformation." Revenue from Snap's own AI bets is still TBD.
In February, Snap had said its global daily users fell by 3 million quarter over quarter. Some of that came from lower marketing spend. Some came from Australia's social media minimum age act.
This quarter Snap clawed users back. The advertiser side of the business is the one that hasn't bounced.
The cushion Wall Street thought Snap had heading into 2026 just got smaller.
