Snap Inc. shares surged 16% in after-hours trading Wednesday following a stronger-than-expected third-quarter revenue report and the proclamation of a notable partnership with artificial intelligence search engine Perplexity AI. The deal, valued at $400 million in cash and stock over one year, aims to integrate Perplexity AI’s capabilities directly into Snapchat, offering users AI-powered answers to queries within the app.
The revenue boost and strategic alliance signal Snap’s efforts to bolster user engagement and compete more effectively with dominant social media platforms like TikTok and Meta’s Facebook and Instagram. Snap’s third-quarter revenue reached $1.51 billion, exceeding analyst expectations of $1.49 billion, according to LSEG data. The company also reported a narrowed net loss of $104 million, improving from $153 million in the same quarter last year.
Perplexity AI will manage the chatbot responses within Snapchat,and Snap will not sell advertising related to those responses,according to Snap CEO Evan Spiegel. Revenue contributions from the partnership are anticipated to begin in 2026.
the collaboration addresses a key need for both companies, according to Emarketer principal analyst Max Willens. “perplexity needs a way to build its profile among younger consumers, and Snap needs an AI chat partner that will keep its users engaged without leaving its app,” Willens said.
Snap’s financial performance was also supported by an 8% increase in direct response ad revenue,driven by demand for ad optimizations focused on driving app downloads and website visits. Daily active users (DAUs) on Snapchat grew 8% to 477 million worldwide.
However, Snap cautioned that DAUs could decline in the fourth quarter due to shifting investment priorities and the impact of new regulations, including Australia’s Social Media Minimum Age bill, set to take effect in December.
The company projects fourth-quarter revenue between $1.68 billion and $1.71 billion, aligning with analyst estimates of $1.69 billion.
