Snap's Bold AI Bet with Perplexity Sends Shares Up 23%

Snap Inc. posted a healthy third-quarter result and unveiled a strategic tie-up with AI startup Perplexity, announcing plans to embed Perplexity’s AI search directly into Snapchat. The deal — which promises verifiable answers inside the app — helped lift Snap shares by about 23% in after-hours trading.

Perplexity will provide roughly $400 million to Snap over the coming year in a package of cash and equity. While the company expects meaningful revenue from the arrangement to begin in 2026, the partnership is designed to sharpen Snap’s competitive edge against platforms such as TikTok and Meta’s Facebook and Instagram, and to make the app more attractive to advertisers and users alike.

Snap’s focus on targeted, direct-response advertising paid off in the quarter: revenue climbed 10% to $1.51 billion, topping analyst forecasts of $1.49 billion. Losses narrowed to $104 million from $153 million a year earlier, and daily active users rose 8% to 477 million worldwide — modestly above expectations and a sign of steady engagement.

The company is also expanding AI tools that run on-device, letting creators generate AR lenses and other content from simple prompts. Revenue tied to direct-response formats, notably "Pixel Purchase" and "App Purchase" optimizations, increased about 8%, underscoring strong advertiser interest in precise campaign performance.

Looking forward, Snap warned daily active users could soften in the fourth quarter amid shifting investment priorities and new rules, including Australia’s Social Media Minimum Age bill due in December. For the quarter, management expects revenue between $1.68 billion and $1.71 billion, roughly in line with analysts’ $1.69 billion estimate.