Visual messaging app Snapchat’s owner Snap saw its shares soaring by more than 20% during pre-market trading on Thursday after its third quarter earnings results beat Wall Street estimates, while the company also announced a $400 million partnership with Perplexity AI.
The company reported adjusted earnings per share of 10 cents, doubling Wall Street’s expectation of five cents.
Revenue rose 10% year-on-year to $1.51 billion, surpassing both the company’s guidance and analyst estimates.
The firm’s adjusted EBITDA also comfortably cleared expectations.
Snap narrowed its net loss to $104 million from $153 million a year earlier, helped by improving demand from small and medium-sized advertisers.
Daily active users rose 8% to 477 million, slightly ahead of market projections, with steady growth seen across all regions.
“We like new ad-tech initiatives and subscription momentum,” analysts at Piper Sandler said, noting that Snap+ subscriptions now represent a $750 million run-rate.
Partnership with Perplexity AI deepens Snap’s AI ambitions
In a move that underscores its growing interest in artificial intelligence, Snap announced a one-year, $400 million partnership with Perplexity AI.
Starting in early 2026, Perplexity’s chatbot will be integrated into Snapchat’s popular Chat interface, reaching nearly one billion monthly active users.
The integration will enable users to receive verified, conversational answers to their questions directly within the Snapchat app, with revenue contributions anticipated to begin in 2026.
Perplexity will pay Snap through a mix of cash and equity, representing roughly 7% of Snap’s 2024 annual revenue.
The collaboration will allow users to access AI-powered information and discovery tools directly within the app.
“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,” said Aravind Srinivas, chief executive of Perplexity.
The market’s response to the partnership provided fresh insight into how investors value traditional tech firms that align with AI startups or integrate their technologies.
The agreement also strengthens Snap’s position against bigger competitors like TikTok and Meta-owned Facebook and Instagram, which continue to dominate digital advertising due to their vast user bases.
Snap indicated that it views itself as a potential collaborator for other AI companies, offering them “a privacy-safe way to reach hundreds of millions of people who already communicate through chat every day,” according to the company’s statement.
Outlook remains upbeat despite regulatory pressures
Snap projected fourth-quarter revenue between $1.68 billion and $1.71 billion, above analyst expectations of $1.69 billion.
The company warned, however, that daily active users may decline slightly in the coming quarter due to changing investment priorities and new age verification rules.
Among the regulatory shifts expected to affect engagement is Australia’s upcoming Social Media Minimum Age bill, set to take effect in December.
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