Snap and Perplexity end their partnership “amicably”

Snap, in their Q1 results updates said that it has “amicably ended” its partnership with AI company Perplexity. “Our revenue guidance range assumes no contribution from Perplexity as we amicably ended the relationship in Q1,” the company noted.

Perplexity was set to pay Snap $400 million in cash and equity over one year as part of the deal, where the AI company’s search engine would have been integrated directly into Snapchat. The deal was announced last November.

The collapse was not entirely abrupt. As early as February, Snap had already excluded any potential Perplexity revenue from its Q1 guidance, saying the companies had yet to mutually agree on a path to a broader rollout. Limited testing had begun with select users, but a broader deployment was never agreed upon.

Snap beats Q1 estimates despite end of partnership

Snap reported first-quarter revenue of $1,529 million, up 12% year-on-year. Net loss came in at $89 million, compared to $139.6 million in the year-ago period, a narrowing of 36%. Adjusted EBITDA stood at $233 million, operating cash flow of $327 million, and free cash flow of $286 million Daily active users rose 5% to 483 million, beating analyst estimates of 475.6 million, while monthly active users reached 956 million.

Ad revenue grew 3% to $1.24 billion, while other revenue, driven by Snapchat+ subscriptions, Memories Storage, and Lens+, rose 87% to $285 million. The company acknowledged that large advertisers in North America remained a headwind but said it was beginning to see encouraging signs of improvement. The company also noted an approximately $20 to $25 million impact from the geopolitical headwinds in the Middle East experienced during March.

Snapchat saw 956 million global monthly active users (MAU) in Q1, an increase of 43 million or 5% year-over-year and global daily active users (DAU) grew to 483 million or 5% year-over-year.

For Q2, Snap guided revenue of $1.52 billion to $1.55 billion, explicitly stating that the range assumes no contribution from Perplexity.

“In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow,” said Evan Spiegel, CEO. “We remain focused on disciplined execution as we invest in Specs and our longterm opportunity in intelligent eyewear and look forward to sharing more at AWE on June 16th,” he said in the press release.