Snap Inc. shares surged more than 25% in after-hours trading on Wednesday following the announcement of a $400 million partnership with Perplexity AI Inc. and a better-than-expected third-quarter earnings report.
Under the new partnership, Perplexity will pay Snap $400 million over one year in a mix of cash and equity. The collaboration will see Perplexity’s answer-engine integrated into Snapchat’s Chat interface starting in 2026. Snap also confirmed that its existing My AI chatbot will continue to be available to users.
Q3 Earnings Beat Expectations
For the quarter ended September 30, Snap’s revenue rose 10% year-over-year to $1.51 billion, surpassing analysts’ estimates of $1.49 billion, according to data from LSEG. The company’s net loss narrowed to $104 million, compared with $153 million a year earlier.
Snap’s advertising business, which contributes around 90% of total revenue, generated $1.32 billion in Q3, marking a 5% annual increase. Direct response ad revenue climbed 8%, supported by higher demand for “Pixel Purchase” and “App Purchase” ad optimizations.
Subscriber Growth and User Metrics
Snapchat’s paid subscriptions continued to expand, reaching nearly 17 million users, up from almost 16 million in the previous quarter. This growth helped drive a 54% year-over-year jump in the company’s “other revenue” segment to $190 million.
The platform’s daily active users (DAUs) increased 8% to 477 million globally. However, Snap cautioned that DAU growth could slow in the fourth quarter due to shifting investment priorities, regulatory changes, and age verification measures.
Q4 Outlook
For the upcoming quarter, Snap projected revenue between $1.68 billion and $1.71 billion, broadly aligning with analysts’ expectations of $1.69 billion.
Snap’s stock closed 2.28% lower at $7.30 per share during regular trading on the New York Stock Exchange but skyrocketed over 25% in extended trading following the announcements.
The partnership with Perplexity AI marks Snap’s latest step toward expanding its AI-driven ecosystem and strengthening engagement on the Snapchat platform as it seeks to diversify beyond advertising.
