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Snap stock climbed 10% on Thursday after announcing a $400 million deal with Perplexity AI and releasing its third-quarter financial results.
The company said that it will be integrating Perplexity’s artificial intelligence-powered search engine directly into the Snapchat app.
As part of the agreement, Perplexity is set to pay the social media platform $400 million over one year “through a combination of cash and equity,” according to Snap’s letter to investors.
The social media company expects to start seeing revenue from the deal in 2026.
“Snap’s strategic partnership with Perplexity AI represents a meaningful step toward building out alternative revenue streams, as similar to Pinterest, large advertisers in the US seem to be pulling back from advertising on the platform,” Deutsche’s Benjamin Black said in a note Thursday.
Although users will still be able to use Snap’s existing My AI chatbot, the added Perplexity engine will help “find real-time answers from credible sources and explore new topics within the app,” according to a release.
Snap CEO Evan Spiegel said in the company’s earnings call that the integration “will help Perplexity drive additional subscribers, which I think is something that will be valuable to their business.”
Snap posted solid third-quarter results, reporting revenue of $1.51 billion, which beat LSEG estimates of $1.49 billion. The company recorded a loss of 6 cents per share, which was not comparable to estimates.
The Snapchat parent also authorized a $500 million stock repurchase program, citing a strong balance sheet.
The platform’s daily active users increased 8% year over year to 477 million, surpassing StreetAccount’s projection of 476 million.
However, Snap warned that DAUs may decline in the fourth quarter as the company rolls out age verification and age limits.
Increased government regulations like Australia’s social media minimum age bill, effective in December, will also likely contribute to lower engagement, the company said.
Utah and California have also signed online child safety bills that will require social media platforms to verify user ages and enforce safeguards for minors.
“These actions are an important step in maintaining a safe and compliant platform, though we expect they will also adversely affect engagement metrics as implementation progresses,” Spiegel said.
Snap will continue expanding in the hardware space with the 2026 release of its sixth-generation augmented reality glasses, Specs. Developers will be able to incorporate OpenAI and Google’s Gemini AI models into the smart glasses’ program.
“We’ve got a really exciting year ahead here as we prepare for the public release of Specs,” Spiegel said. “And we’ve been thinking a lot about ways to accelerate our technical leadership in the space.”
Spiegel said the company is looking to put Specs into its own subsidiary to create “opportunities to partner” as it prepares for its public rollout.
The company launched the Imagine Lens, an open-prompt image generation Lens, in October and said that over 500 million users engaged with generative-AI-powered lenses in the third quarter.
“Over the long term, we see SNAP as building toward its multi-year strategic vision for where consumer engagement is shifting (AR/special computing) and shifting its platform/product evolution (including Specs hardware) to meet this vision,” Goldman Sachs analysts wrote Thursday.
Snapchat 3 month stock chart.
