SAN FRANCISCO / BENGALURU – Snap Inc. (SNAP.N) saw its shares jump 18% in premarket trading on Thursday after announcing a $400 million partnership with AI startup Perplexity, signaling renewed investor confidence in the social media company’s ability to compete in the artificial intelligence (AI) space. Following the news, Snap’s stock had already surged 16% after market hours on Wednesday.

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Details of the Perplexity AI Partnership

The deal integrates Perplexity’s AI-powered search engine into Snapchat, enhancing the platform’s capability to respond to user queries through a chatbot interface. The AI integration positions Snap to better compete with Meta (META.O) and TikTok, two dominant players favored by global marketers.

CEO Evan Spiegel emphasized that user interactions with Perplexity’s AI would not be monetized through advertisements, maintaining privacy and user trust. The partnership is structured as a combination of cash and equity, with the startup expected to pay Snap $400 million over one year. Revenue from the deal is anticipated to begin reflecting in Snap’s financials in 2026.

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Strong Financial Performance

Snap’s AI partnership news follows strong quarterly results:

• Third-quarter revenue exceeded analyst expectations.
• Fourth-quarter revenue guidance: Between $1.68 billion and $1.71 billion, slightly above analysts’ consensus of $1.69 billion.

The positive results came amid robust performances from peers such as Meta, Alphabet (GOOGL.O), and Reddit, although Pinterest (<PINS.N>) missed fourth-quarter revenue expectations and cited softer U.S. and Canadian ad spending due to rising tariff costs.

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Market and Investor Implications

• AI Strategy Validation: The Perplexity deal reinforces Snap’s ability to compete with larger social media and tech rivals in AI.
• Stock Momentum: Snap shares gained momentum after the announcement, recovering some of the 32% decline recorded earlier this year.
• Revenue Potential: The $400 million partnership is expected to contribute to Snap’s revenue starting in 2026, diversifying income streams.
• Industry Context: The move highlights the growing importance of AI integration in social media platforms for engagement and competitiveness.

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Analyst Commentary

RBC analysts noted that while the compute cost implications are still uncertain, Snap could potentially deliver AI capabilities approaching Meta AI on a relatively modest budget, marking a strategic win for the company.

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Key Takeaways

• Snap partners with Perplexity AI in a $400 million deal to integrate AI search into Snapchat.
• Shares rose 18% premarket, reflecting investor confidence in Snap’s AI ambitions.
• AI revenue is expected to begin contributing in 2026.
• Strong quarterly revenue results and guidance reinforce Snap’s recovery in the social media sector.
• Competitively positions Snap against Meta, TikTok, and other global tech giants.