Snap partners with Perplexity on a $400 million AI advertising campaign; after Q1 ends, the Iran war costs another $25 million

Snap released its 2026 Q1 financial report on May 6 and, in a letter to investors, disclosed that its $400 million AI advertising partnership with Perplexity announced in November last year has “amicably concluded” in Q1. TechCrunch, citing comments Snap made publicly, wrote: “Our revenue guidance assumes that Perplexity will contribute nothing, because we have amicably ended the relationship in Q1.” The two sides failed to agree on the collaboration terms; integration features had been tested internally within Snapchat but were never officially rolled out to all users. Snap’s stock fell about 4% after hours.

From test to end: Snap and Perplexity couldn’t reach consensus on the “rollout path”

The original agreement was announced in November 2025, worth $400 million, and is the largest advertising and integration deal Snap has made to date with a generative AI company. The feature design was to integrate Perplexity’s AI search experience into Snapchat.

In its letter to shareholders, Snap said clearly: “The parties were unable to reach an agreement on the path to a broader rollout.” This statement doesn’t point to which side exited first, spreads responsibility between both parties, and implies that the termination reason was the failure to negotiate terms rather than a unilateral action.

For Perplexity, this deal ending means a sharp contraction from the $400 million revenue it had publicly announced in November; the company’s current valuation depends heavily on business-model validation for monetizing AI search. Snap’s is one of Perplexity’s few large-scale advertising integration cases.

Snap Q1 financial report: revenue growth, but the Iran war eats into ad revenue

Key numbers from Snap’s Q1 financial report:

Revenue $1.53 billion, up 12% year over year

Adjusted EBITDA $233 million, more than double last year’s Q1

Free cash flow $286 million, nearly three times last year

Snapchat daily active users worldwide 483 million, up 5% year over year

Snap also disclosed the impact of the Iran war on ad revenue: in March, it lost $20–$25 million in ad revenue for the month. The company cut about 1,000 jobs in April (16% of full-time employees) and expects to reduce its annualized cost base by more than $500 million starting in the second half of 2026.

Q2 guidance and the revenue mix after Perplexity exits

Snap’s Q2 revenue guidance is $1.52–$1.55 billion, in line with analysts’ expectations. The guidance does not include any contribution from Perplexity, meaning the company is assuming this deal’s revenue goes to zero.

Snap’s Q1 numbers mostly met expectations, but what the market is watching are multiple concurrent negative conditions: the Iran ad hit, Perplexity’s exit, and the 16% layoffs. Snap’s stock fell 4% after hours, reflecting investors’ concerns about growth momentum from Q2 through the second half.

Specific trackable developments going forward: whether Perplexity will publicly respond to the end of the contract, and whether Snap, in a scenario without Perplexity, will launch new integration partnerships with other AI search providers.

This article—Snap and Perplexity’s $400 million AI advertising partnership ends in Q1, and the Iran war eats another $25 million—was first published on Chain News ABMedia.