Synopsis
Snap has amicably ended its partnership with AI startup Perplexity, canceling plans to integrate Perplexity's AI search into Snapchat. The deal, valued at $400 million, would have brought conversational AI search to the app. Despite this, Snap reported stronger first-quarter results with a 12% revenue increase and narrowed net loss.The agreement, announced last November, would have seen Perplexity pay Snap $400 million in cash and equity over a one-year period.
Snap said its current sales guidance now “assumes no contribution from Perplexity.” Earlier, the company had expected the partnership to begin contributing to revenue from 2026 onwards.
The proposed integration aimed to bring Perplexity’s conversational AI search into Snapchat’s “Chat” interface, allowing users to ask questions and receive AI-generated answers directly within the app. The feature had entered testing with a small group of users, but Snap said in February that the two companies had “yet to mutually agree on a path to a broader rollout.”
The partnership was also expected to support Snap’s advertising business. The company has been pushing deeper into direct-response advertising products such as “App Purchase”. A search-led AI experience inside Snapchat could have created stronger monetisation opportunities by tapping into user intent and engagement.
Alongside the update on Perplexity, Snap reported stronger first-quarter results. Revenue rose 12%, supported by resilient advertising spending and growth in daily active users, especially in markets outside North America and Europe.
The company’s net loss narrowed to $89 million from $140 million a year earlier.
Snap expects second-quarter revenue to come in between $1.52 billion and $1.55 billion, with the midpoint close to analyst estimates of $1.54 billion.
Daily active users rose to 483 million in the first quarter, up by 9 million from the previous quarter. Monthly active users increased 5% to 965 million.
Snap said growth was driven by newer features across the platform, including Snap Map and its Lenses augmented reality filters. However, North America, the company's largest market, remained weaker, with a decline in daily active users and revenue growth slowing to 2% during the quarter.
“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, in a press release. “We remain focused on disciplined execution as we invest in Specs and our long-term opportunity in intelligent eyewear and look forward to sharing more at AWE on June 16th.”
The development comes nearly a month after Snap announced plans to cut 1,000 jobs, around 16% of its full-time workforce, and close more than 300 vacant positions.
