By Khadija Saeed
Publication Date: 2026-05-07 10:32:00
SANTA MONICA, California, May 7, 2026, 03:06 PDT
Snap Inc. dropped 7% after hours as the company revealed its $400 million AI partnership with Perplexity is off, and said ongoing Middle East violence weighed on first-quarter ad sales—even as revenue climbed faster and losses shrank. The scrapped deal, intended to integrate Perplexity’s answer engine into Snapchat Chat, failed to offset the ad hit.
Why does it matter? Snap’s comeback depends on winning back North American ad dollars and nudging more users toward paid extras like subscriptions, storage, and other non-ad services. The company flagged ongoing weakness among big advertisers in North America. Still, non-ad revenue—mainly from Snapchat+ subscriptions, Memories Storage, and Lens+—jumped 87%, hitting $285 million.
This hits just ahead of the next regular U.S. session, with investors putting Snap up against heavyweight social ad competitors. According to Reuters, Snap is still caught in the middle—wedged between TikTok and Meta’s Instagram in a tough advertising market. The company’s ongoing push: convincing advertisers that its newer ad formats deserve more dollars.
Snap’s first-quarter revenue climbed 12% year-over-year to $1.529 billion. The company trimmed its net loss to $89 million, down from $140 million a year ago. Adjusted EBITDA moved up sharply, hitting $233 million versus $108 million. CEO Evan Spiegel pointed to a “return to growth in daily active users”…
