Snap Inc. released its first-quarter financial results on Wednesday and provided second-quarter sales guidance that incorporates the conclusion of its partnership with artificial intelligence startup Perplexity. In an investor letter, the company also cited uncertainty regarding the “geopolitical situation” in the Middle East as a factor in its forecast.
For the first quarter ending March 31, Snap reported revenue of $1.53 billion, a 12% increase year-over-year and in line with analyst expectations compiled by LSEG. The company’s net loss narrowed by 36% to $89 million from $139.6 million in the same quarter of the previous year.
According to figures from StreetAccount, Snap’s global daily active users (DAU) grew to 483 million, surpassing the projected 475.6 million. However, the global average revenue per user (ARPU) was $3.17, slightly below the anticipated $3.20.
In a statement, Snap CEO Evan Spiegel said, “In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow.”
The company’s investor letter noted challenges with advertising growth in the first quarter. “Large advertisers in North America remained a headwind to advertising growth,” the letter stated, adding that the company is “beginning to see encouraging signs that this part of the business is improving.”
Looking ahead to the second quarter, Snap projected revenue to be between $1.52 billion and $1.55 billion. The midpoint of this range aligns with analyst estimates of $1.54 billion.
The guidance reflects two key developments. The company confirmed its partnership with Perplexity has ended, stating its forecast “assumes no contribution from Perplexity as we amicably ended the relationship in Q1.” The deal, announced in November, had been valued at a reported $400 million.
Additionally, Snap addressed the business environment in the Middle East. The guidance “assumes that the operating environment in the Middle East region remains consistent relative to the magnitude of the headwinds we have experienced in March and April,” the company wrote, cautioning that “the trajectory of the geopolitical situation in the region is uncertain.”
The earnings report follows an announcement from Snap in April that it planned to reduce its workforce by approximately 16% and halt hiring for 300 open positions as part of a strategic shift toward artificial intelligence.
Following the release of the report on Wednesday, Snap’s shares declined approximately 4% in extended trading.
