Snap Rockets 10% As $400M Perplexity AI Play Puts It on a Collision Course With Google Search

Snap’s stock is up 10% today after the social media company announced a $400 million partnership with Perplexity AI… and dropped a third-quarter earnings report that was surprisingly solid. It’s a rare bright spot for the Snapchat parent after a challenging year for digital advertising.

Under the deal, Perplexity’s AI-powered search engine will be integrated directly into Snapchat, giving the platform a built-in, conversational search tool for its users. In exchange, Perplexity will pay Snap $400 million over the next year… a mix of cash and equity that’s expected to start showing up on Snap’s balance sheet by 2026.

“This partnership represents a meaningful step toward building out new revenue streams,” CEO Evan Spiegel said on the company’s earnings call. The deal comes as Snap works to diversify beyond traditional advertising, which has been pressured by slower spending from large U.S. advertisers. Analysts at Deutsche Bank said the partnership could “help establish alternative revenue channels,” similar to moves made by Pinterest to reduce dependence on ad budgets.

Snap’s third-quarter financials offered another reason for excitement. The company reported revenue of $1.51 billion, surpassing Wall Street’s $1.49 billion estimate and rising 10% year over year. Net losses narrowed to $104 million, or six cents per share, compared with a $153 million loss a year earlier. Daily active users climbed 8% to 477 million, slightly above expectations.

Snap also authorized a $500 million stock buyback program, signaling confidence in its improving balance sheet and ongoing cost-control efforts.

Still, management cautioned that daily active users could decline in the fourth quarter as new age-verification and safety laws take effect in Australia, Utah, and California. The regulations will require social platforms to confirm users’ ages and limit underage access, a move expected to temporarily impact engagement metrics.

Beyond compliance challenges, Snap continues to invest heavily in hardware and augmented reality. The company plans to launch its sixth-generation smart glasses, Specs, in 2026, giving developers access to OpenAI and Google Gemini models. Spiegel said Snap is considering spinning off the Specs division into a separate subsidiary to expand partnerships and attract outside investment.

AI integration is already showing early traction across the platform. The company’s Imagine Lens, introduced in October, allows users to generate images from text prompts and has already drawn more than 500 million users.

Analysts at Goldman Sachs said Snap’s efforts mark “a continuation of its multi-year pivot toward AR and spatial computing,” adding that the company is positioning itself for “where consumer engagement is moving.”

Sure, the stock’s still a shadow of its 2021 self. But between the AI partnerships, steady user growth, and a healthier balance sheet, Snap’s finally moving in the right direction.

At the time of publishing this article, Stocks.News holds positions in Snap and Google as mentioned in the article.