May 6 (Reuters) – Snap on Wednesday said its first-quarter advertising revenue was impacted by the conflict in the Middle East and slowing advertising revenue in North America.
The Snapchat parent’s shares fell nearly 6% in extended trading.
The social media company and AI startup Perplexity “amicably” ended their $400 million deal in the first quarter, it said on Wednesday. The deal, aimed to offer answers to users’ questions within the Snapchat app, was announced in November.
Advertising revenue rose 3% to $1.24 billion, driven by direct response ads, which are designed to prompt specific actions like app downloads or website visits. The company said it had an estimated $20 million to $25 million impact from the Middle East conflict during March.
Snap, squeezed between dominant platforms such as TikTok and Meta’s Instagram in a crowded social media market, has been turning to subscriptions to boost its revenue, which comes predominantly from advertising sales.
Revenue of $1.53 billion for the first quarter came in line with LSEG-compiled analysts’ average estimate.
Snap expects second-quarter revenue of $1.52 billion to $1.55 billion, the mid-point of which is largely in line with estimates of $1.54 billion.
In contrast, rivals Meta, Pinterest and Reddit reported upbeat first-quarter revenue.
Snap reported 483 million daily active users in the first quarter, adding 9 million from the prior quarter. But DAUs in North America declined, while revenue growth in the region slowed to 2%.
The company’s average revenue per user (ARPU) declined sequentially to $3.17 in the quarter and missed analysts’ estimates of $3.21, as it focuses on international markets including the Middle East, North Africa, India and Asia Pacific.
Adjusted earnings before interest, taxes, depreciation, and amortization came in at $233.3 million, beating estimates of $205.9 million.
“Nearly 70% of advertising spend now uses at least one of our AI-powered automation solutions,” Snap said in its letter to shareholders.
Last month, Snap said it would lay off about 1,000 employees, after Irenic Capital Management pushed the company to optimize its portfolio and improve performance. The company said in February that its Snapchat+ subscribers surpassed 25 million.
(Reporting by Jaspreet Singh in Bengaluru; Editing by Sahal Muhammed)
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