Observed Signal · May 6, 2026 · Earnings Report · Source: CNBC Technology · Impact: 4/5 · Sentiment: Negative
Snap Gives Cautious Guidance as Perplexity Deal Ends
Snap reported Q1 2026 results and issued cautious sales guidance, saying its forecasts assume no contribution from Perplexity after amicably ending the previously announced $400 million partnership in Q1. Revenue for the quarter was $1.53 billion, with a net loss of $89 million and global daily active users rising to 483 million. Snap guided Q2 revenue to $1.52–$1.55 billion and noted that large North American advertisers remained a headwind. Management also flagged uncertainty from the evolving geopolitical situation in the Middle East as a risk to regional operations. The company in April announced layoffs affecting about 16% of staff and a hiring freeze for roughly 300 open roles while pursuing an "AI-driven transformation." Shares fell in extended trading after the results and guidance.
Snap is a major social platform and this is its quarterly earnings report with guidance; the unexpected end of the $400M Perplexity AI partnership, staffing cuts, and regional geopolitical risk materially affect Snap's ad-revenue outlook and AI strategy, which has implications for the broader advertising ecosystem.
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Key Takeaways & Evidence Grounding
- Snap reported Q1 2026 revenue of $1.53 billion.
- Snap posted a Q1 net loss of $89 million and EPS loss of $0.05.
- Global daily active users were 483 million; ARPU was $3.17.
- Snap said it amicably ended its $400 million partnership with Perplexity in Q1 and assumes no contribution from Perplexity in guidance.
- Snap guided Q2 2026 sales to $1.52 billion–$1.55 billion and cited Middle East geopolitical uncertainty and weakness among large North American advertisers; in April it announced ~16% layoffs and halted hiring for ~300 open positions.
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Snap ends $400M partnership with Perplexity
Snap disclosed in its Q1 2026 earnings that its previously announced deal with Perplexity has been "amicably ended." The agreement, first announced in November 2025, would have seen Perplexity’s AI search engine integrated into Snapchat’s Chat interface and involved $400 million in cash and equity to Snap over one year. Snap said the companies parted ways in Q1 and that its sales guidance assumes no revenue contribution from Perplexity. The integration had been tested with select users but parties had not agreed on a broader rollout. Snap also reported Q1 DAU of 483 million (up 5% YoY) and MAU of 965 million (up 5%). Perplexity did not immediately comment on the termination.
Snap posts strong revenue and profit improvement in Q2 2026
Snap Inc. reported significantly improved financial results for Q2 2026: revenue rose to $1.599 billion (up 19% year-over-year), net loss narrowed to $164 million, and adjusted EBITDA increased to $250 million. Operating cash flow nearly doubled to $176 million and free cash flow reached $121 million. Snap said revenue growth was driven by improved ad performance and expanded direct revenue sources, while margins and operational efficiency improved. The company reported about 971 million monthly active users and emphasized disciplined investment to further increase free cash flow per share and sustainable profitability.
California governor vetoes bill banning 'pervert glasses' secret recording
California Governor Gavin Newsom vetoed Senate Bill 1130, which would have made it illegal to secretly record people using wearable recording devices like smart glasses. Newsom argued the bill defined wearable recording devices too broadly, potentially causing unintended consequences, and that existing state laws already provide adequate protections. The bill aimed to address privacy concerns amid the rise of always-listening devices from companies like Meta and Snap, which have seen significant sales. If enacted, California would have been the first state to regulate smart glasses, with fines or prison time for violators. The decision comes as other countries, like Norway, are considering similar bans. Critics have dubbed such devices 'pervert glasses' following incidents of harassment. The veto means no new specific regulations for these wearables in California yet.
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