Snap ends Perplexity deal, says advertising business took a hit from “geopolitical headwinds” in Q1

Snap is down some 10% in premarket trading after saying it ended an AI deal and reporting first-quarter earnings results that hit estimates but suggested cracks in its advertising business.

Snap reported $1.26 billion in advertising revenue for the first quarter, which was a hair under the $1.27 billion analysts polled by FactSet were penciling in, and included a “$20 to $25 million impact from the geopolitical headwinds in the Middle East experienced during March.”

It reported $1.53 billion in total revenue for the first quarter, which was in line with estimates, and $0.10 adjusted earnings per share — broadly in line with expectations. Subscriptions, while still a relatively small chunk of revenue, are fueling the company’s sales growth as its advertising business stagnates.

The company told investors it expects revenue in the second quarter to land between $1.52 billion and $1.55 billion, also in line with analysts’ estimates, but warned “large advertisers in North America remained a headwind.” That guidance also assumes no contribution from its $400 million deal with Perplexity, which it announced in November and said has now ended “amicably.”