Snap’s $400 Million AI Deal with Perplexity Boosts Revenue and Shares
Snap exceeded its third-quarter revenue expectations and announced a $400 million partnership with Perplexity AI. The collaboration will integrate Perplexity’s AI-powered search engine into Snapchat, and shares rose 16% after the news. Perplexity will pay Snap in both cash and equity over one year, with revenue expected to start flowing in 2026. The feature will let users get verified answers directly within the app, enhancing engagement.
Strategic Push Toward Competitive Growth
This deal strengthens Snap’s position against competitors like TikTok and Meta’s Facebook and Instagram. It benefits both companies, as Perplexity gains exposure among younger users, while Snap keeps users engaged on its platform.
To further boost growth, Snap has focused on direct-response ads that prompt user actions such as app downloads or purchases. These ads generated an 8% increase in revenue this quarter. This growth came from strong demand for “Pixel Purchase” and “App Purchase” optimization tools, which help advertisers target high-value customers.
Performance and Outlook
Snap’s third-quarter revenue rose 10% to $1.51 billion, surpassing the $1.49 billion forecast. Its net loss narrowed to $104 million from $153 million a year earlier. Daily active users climbed 8% to 477 million globally, showing steady engagement across markets.
However, Snap cautioned that user numbers might dip in the fourth quarter. The company cited changes in investment focus and new regulations, including upcoming age verification laws. For example, Australia’s Social Media Minimum Age bill, expected to take effect in December, could reduce engagement.
Looking ahead, Snap projected fourth-quarter revenue between $1.68 billion and $1.71 billion, roughly in line with analyst expectations of $1.69 billion.
