Snap Inc. has struck a $400 million partnership with Perplexity AI to integrate the startup’s search engine directly into Snapchat.
This immediately sent the company’s shares up by 16% after trading hours.
Under the one-year deal, paid in cash and equity, Perplexity’s AI-powered “answer engine” will become part of Snapchat’s chat interface, letting users ask questions and receive verified, real-time responses without leaving the app.
Revenue contributions from the partnership are expected to begin in 2026.
Snap CEO Evan Spiegel confirmed that the new feature will be ad-free. “Perplexity AI will control the responses from their chatbot inside of Snapchat. So, we won’t be selling advertising against the Perplexity responses,” he said.
The collaboration will enable Snap to compete more aggressively with social media giants like TikTok and Meta’s Facebook and Instagram, both of which have long topped the advertising market.
Analysts see mutual benefits as Perplexity gains exposure among younger audiences, while Snap strengthens user engagement within its platform.
“Perplexity needs a way to build its profile among young consumers, and Snap needs an AI chat partner that will allow its users to stay engaged without leaving its app,” said Max Willens, principal analyst at Emarketer.
Snap’s own AI tool, “My AI,” will be available, but users will now have the option to interact with Perplexity’s chatbot instead. Spiegel described the initiative as part of Snap’s goal to make artificial intelligence “more personal, social, and fun.” He also noted that more third-party AI integrations could follow.
The announcement came alongside Snap’s third-quarter earnings, which showed a 10% year-on-year revenue increase to $1.51 billion, beating analyst expectations of $1.49 billion, according to LSEG data.
The company’s net loss narrowed to $104 million, down from $153 million a year earlier, while daily active users climbed 8% to 477 million globally.
Snap’s focus on direct-response advertising continued to pay off, with that segment rising 8% during the quarter. Growth was driven by demand for its “Pixel Purchase” and “App Purchase” tools, which help businesses reach users more likely to complete transactions.
Still, the company warned of possible challenges in the coming quarter. Snap expects daily active users could decline slightly due to new regulatory changes, including Australia’s Social Media Minimum Age Bill, which takes effect in December and will tighten access for younger users.
For the final quarter of 2025, Snap projected revenue between $1.68 billion and $1.71 billion, broadly in line with market expectations of $1.69 billion.
