Snapchat to get AI-powered search through $400 million Perplexity partnership

Snap reported stronger-than-expected third-quarter results and announced a $400 million partnership with AI startup Perplexity to integrate its AI-powered search engine into Snapchat, sending its shares soaring 23% in after-hours trading

Snap has announced a strategic partnership with Perplexity AI to integrate the startup’s artificial intelligence-powered search engine into Snapchat, a move aimed at enhancing the platform’s user experience and competitiveness. Under the agreement, Perplexity will pay $400 million in cash and equity over a year, with revenue contributions expected to begin in 2026. The integration will allow Snapchat users to access verified, AI-generated answers directly within the app.

The collaboration is expected to help Snap better compete with TikTok and Meta’s Facebook and Instagram, which currently dominate the digital advertising space due to their larger audiences.

Revenue growth and user expansion drive recovery

Snap reported a 10% rise in third-quarter revenue to $1.51 billion, surpassing analyst expectations of $1.49 billion. Its net loss narrowed to $104 million, down from $153 million a year earlier. The company’s daily active users climbed 8% to 477 million, slightly exceeding forecasts.

Revenue growth was largely driven by an 8% surge in direct-response advertising, supported by strong adoption of “Pixel Purchase” and “App Purchase” optimization tools that help businesses target high-intent users.

Industry analysts said the results mark a rebound for Snap after previous ad platform disruptions. However, the company cautioned that daily active users may decline in the fourth quarter due to new age verification rules and evolving social media regulations, including Australia’s upcoming Social Media Minimum Age bill.

Snap projected fourth-quarter revenue between $1.68 billion and $1.71 billion, aligning closely with market expectations.