Key takeaways Snap's stock surged up to 25% in after-hours trading following better-than-expected third-quarter earnings and a major AI partnership announcement. Perplexity AI will pay Snap $400 milli...
Snap Inc. announced Wednesday it has struck a $400 million partnership with artificial intelligence startup Perplexity AI while delivering third-quarter financial results that exceeded analyst expectations, sending the social media company's shares soaring in extended trading.
The Snapchat parent company reported third-quarter revenue of $1.51 billion, representing a 10% increase from the same period last year and surpassing Wall Street's forecast of $1.49 billion.
The company posted a loss of 6 cents per share, narrower than the 9-cent loss reported in the third quarter of 2024.
Snap's stock jumped as much as 25% in after-hours trading following the announcements, though gains later moderated to around 15% as executives discussed ongoing business challenges during the earnings call.
Under the newly announced agreement, Perplexity will integrate its conversational AI search engine directly into Snapchat's chat interface beginning in early 2026.
The AI startup will pay Snap $400 million over one year through a combination of cash and equity, with revenue from the partnership expected to begin contributing to Snap's financial results in 2026.
"Our goal is to make AI more personal, social, and fun – woven into the fabric of your friendships, Snaps, and conversations," said Evan Spiegel, CEO of Snap Inc. "This partnership reflects our shared vision for the power of AI to enhance discovery and connection on Snapchat, and we look forward to collaborating with more innovative partners in the future."
Aravind Srinivas, CEO of Perplexity, emphasized the strategic value of the partnership for his company. "Perplexity's mission is to support the world's curiosity," Srinivas said. "Millions of people connect and discover the world through Snapchat. By bringing Perplexity to Snapchat, we're able to serve that curiosity directly where it occurs."
During the earnings call, Spiegel clarified that Perplexity will have "default placement in our chat inbox" and the startup will "control the responses from their chatbot inside of Snapchat." He added that Snap will not sell advertising against Perplexity's responses, noting instead that the integration "will help Perplexity drive additional subscribers."
The integration will allow Snapchat's nearly 1 billion monthly active users to ask questions and receive conversational answers drawn from verifiable sources without leaving the app. Snapchat's existing My AI chatbot will remain available alongside the new Perplexity feature.
Snap reported that global daily active users reached 477 million in the third quarter, up 8% year-over-year and slightly above analyst expectations of 476 million.
Monthly active users climbed to 943 million, representing a 7% increase from the previous year.
The company's adjusted earnings before interest, taxes, depreciation, and amortization came in at $182 million, significantly exceeding the $125 million projection. Snap also announced a $500 million stock repurchase program.
However, not all indicators pointed toward smooth sailing. During the earnings call, Chief Financial Officer Derek Andersen acknowledged persistent headwinds in certain market segments.
"The North America LCS segment remains the primary headwind to our overall revenue growth," Andersen said, though he noted the company is seeing stronger growth and demand for Snap's advertising products from small-to-medium-sized businesses in other regions.
Looking ahead to the fourth quarter, Snap projected revenue between $1.68 billion and $1.71 billion, with the midpoint of $1.695 billion slightly above Wall Street's estimate of $1.69 billion. The company expects adjusted EBITDA between $280 million and $310 million.
In their letter to investors, Snap executives warned that new regulatory policies could impact user metrics in the coming quarter. The company specifically cited Australia's social media minimum age bill and related policy developments as potential challenges.
"While we remain committed to our goal of serving 1 billion global monthly active users, we expect overall DAU may decline in Q4 given these internal and external factors, and as noted above, we expect particularly negative impacts in certain jurisdictions," the company stated.
Despite these concerns, Spiegel expressed confidence in Snap's trajectory. "Our focus on performance, creativity, and simplicity is helping advertisers achieve stronger results while giving our community more ways to communicate," he said. "I'm proud of the team's progress and confident that our discipline and innovation will support durable, long-term growth."
The Perplexity partnership represents Snap's first major integration of an external AI partner directly into its platform, positioning the company to compete more effectively against larger rivals, including TikTok and Meta's Facebook and Instagram.
Key takeaways OpenAI has signed a multi-year, $10 billion agreement with AI chipmaker Cerebras Systems to secure computing infrastructure. The deal will deliver 750 megawatts of computing power throug...
KEY TAKEAWAYS: xAI implemented restrictions preventing Grok from editing images of real people in revealing clothing after global backlash California Attorney General Rob Bonta launched investigation...
Key takeaways TSMC reported fourth-quarter net income of NT$505.74 billion, beating analyst expectations and setting a new record. Fourth-quarter revenue reached NT$1.046 trillion, up 20.5% year over...
