Snap Terminates Perplexity AI Partnership Despite Strong First-Quarter Revenue Growth

2026-05-07 companies

Santa Monica, Wednesday, 6 May 2026.
Snap reported a 12% revenue increase to $1.53 billion in Q1 2026, but shares fell after the company unexpectedly terminated its highly anticipated AI partnership with Perplexity.

A Solid First Quarter Clouded by Strategic Shifts

On Tuesday, May 5, 2026, Snap Inc. (NYSE: SNAP) announced its financial results for the first quarter of the year, reporting a total revenue of $1.53 billion, which represents a 12% year-over-year increase from the $1.36 billion recorded in the same period in 2025 [1][3][5]. The Santa Monica-based company posted a net loss of $89 million, or 5 cents per share [1][2]. This marks a significant improvement from the prior year’s first-quarter net loss of $139.6 million, translating to a narrowing of 36.246 percent [1]. The 5-cent per share loss exceeded Wall Street’s consensus expectations of a 7-cent loss [7]. Furthermore, adjusted earnings factoring out stock option expenses came in at 10 cents per share [2].

The Abrupt End of the Perplexity AI Partnership

Despite the positive earnings report, investor sentiment was dampened by the sudden termination of Snap’s partnership with the generative artificial intelligence startup Perplexity [1]. Originally announced in November 2025, the $400 million agreement had previously driven a 15% surge in Snap’s share price upon its reveal [1]. Snap had anticipated that the partnership would begin contributing to its revenue streams starting in 2026 [1]. However, the company disclosed that the relationship was amicably ended during the first quarter, meaning forward-looking sales guidance now assumes zero contribution from the highly anticipated AI venture [1][5].

Geopolitical Headwinds and Cautious Q2 Guidance

Compounding the loss of the Perplexity deal are ongoing geopolitical headwinds, particularly in the Middle East, which have directly impacted Snap’s advertising revenues [1][5]. While total advertising revenue grew 3% year-over-year to $1.24 billion in the first quarter, the uncertain geopolitical situation in the Middle East resulted in a negative impact of between $20 million and $25 million in March 2026 alone [5]. Snap cautioned investors that the trajectory of the regional conflict remains uncertain [alert! ‘The exact future financial toll of the Middle East conflict is unpredictable due to volatile geopolitical dynamics’], explicitly factoring this instability into its future financial outlook [1][5].

Sources

Earnings report Snap Inc