SNAP Stock Tumbles After Flagging Ad Revenue Hit Amid Iran War

• Sees revenue between $1.52 billion and $1.55 billion in the period ending in June. 
• Geopolitics in the Middle East had a negative impact on Snap’s advertising business.
• Reports Q1 loss of $0.05 while analysts expected a profit of $0.10.

Snap Inc (SNAP) share price dropped 6% after-hours after the social media firm flagged a $20 million to $25 million hit to its advertising revenues due to geopolitical pressures in the Middle-East during the quarter ending March. 

Advertising revenue rose 3% to $1.24 billion, predominantly driven by paid ads. The company said it had an estimated $20 million to $25 million impact from the ​Middle East conflict during the first quarter. 

Snap reported 483 million daily ‌active ⁠users (DAU) 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%.

“In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow,” Snap CEO Evan Spiegel said in a statement.

The company said in an investor letter that “large advertisers in North America remained a headwind to advertising growth” in the first quarter, and while the company is “not satisfied with that outcome,” it is “beginning to see encouraging signs that this part of the business is improving.”

Snap has been struggling to cope with the scale at which its rivals - Meta’s Instagram and China’s TikTok - have been growing, finding it difficult to garner more advertiser interest. 

SNAP Perplexity Deal Falls Apart 

California-based Snap officially ended its artificial intelligence partnership with Perplexity AI in the quarter. 

The company said in the investor letter that its sales guidance “assumes no contribution from Perplexity as we amicably ended the relationship in Q1,” referring to the $400 million deal it announced in November with the generative AI startup. 

Snap also mentioned in the letter that "Nearly ​70% of advertising spend now uses at least one of our ​AI-powered automation ⁠solutions." 

SNAP Q2 Guidance

Snap said second-quarter sales will be in the range of $1.52 billion to $1.55 billion, roughly in line with analyst estimates of $1.54 billion at the midpoint, as per data from Fiscal.ai.

SNAP Retail View 

However, retail sentiment on Stocktwits was ‘bullish’ with ‘high’ message volumes. 

One user felt the company CEO’s vision is increasingly getting “disconnected from reality.”

The stock has lost 24% year-to-date. 

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