- Snap inks a $400 million partnership with Perplexity AI to embed the startup’s answer‑engine directly inside Snapchat’s chat experience; initial rollout slated for early 2026. The agreement is a mix of cash and equity, with revenue recognition beginning in 2026. [1]
- Shares jumped in pre‑market trading after the announcement, with multiple outlets noting a double‑digit spike before the bell. [2]
- Analyst reaction: BMO Capital raised its SNAP price target to $13 (Outperform), citing the Perplexity deal, better‑than‑expected Q3 results, and mixed but constructive Q4 guidance. [3]
- Context from last night’s earnings (Nov. 5): Q3 revenue rose 10% to $1.507B; DAUs hit 477M and MAUs 943M; net loss narrowed to $104M; Snap also authorized a $500M share repurchase program. [4]
What Snap and Perplexity are actually building
Snap will place Perplexity’s AI‑powered, source‑backed Q&A directly in the Chat interface so Snapchatters can ask questions and get conversational, cited answers without leaving the app. Perplexity will pay Snap $400M over one year as the integration rolls out globally, with revenue contribution expected starting in 2026. Snap characterizes the move as a first large‑scale integration of an external AI partner in Snapchat, complementing (not replacing) its existing “My AI.” [5]
Privacy note: CEO Evan Spiegel told Reuters that queries handled by Perplexity inside Snapchat won’t be used for advertising, even as Snap’s own release notes that messages sent to Perplexity will help enhance personalization on Snapchat. Together, those statements frame a product that aims to improve in‑app relevance while ring‑fencing ad targeting from Perplexity‑handled queries. [6]
Why this deal matters
- A new, non‑ad revenue stream: The $400M arrangement adds a clearly defined, near‑term revenue line while Snap continues to fine‑tune its ad stack. Revenue recognition begins in 2026 as the product scales. [7]
- User experience moat: Keeping information‑seeking inside Snapchat (instead of losing sessions to a web search) could raise session length and retention, particularly among Gen Z, where Snap already has deep penetration. [8]
- AI parity vs. larger rivals: Analysts see the integration as a way to close feature gaps with bigger platforms rolling out chat assistants/search across feeds and messages—on a far leaner budget. [9]
The numbers behind Snap’s momentum (Q3 2025)
- Revenue:$1.507B, up 10% YoY
- DAUs:477M (+8% YoY)
- MAUs:943M (+7% YoY)
- Net loss:$104M, improved from $153M
- Free cash flow:$93M
- Capital return:$500MClass A share repurchase authorization
These were disclosed in last night’s press release alongside the Perplexity partner announcement. [10]
Snap also guided Q4 revenue to $1.68B–$1.71B, which straddles consensus and reflects the uneven brand‑spend backdrop across social ads. [11]
What are analysts and investors saying?
- BMO Capital lifted its target to $13 and kept Outperform, pointing to upside from the Perplexity integration and better execution (with a note that Q4 revenue guidance is mixed while EBITDA guidance trends better). [12]
- Coverage across financial media highlighted the pre‑market spike tied to the AI partnership following the Q3 beat. [13]
What Snapchatters can expect
- Early 2026 rollout inside the Chat tab, delivering conversational answers with citations.
- Snapchat+ (the paid tier) continues to expand; third‑party coverage pegs the subscriber base above 17M, adding a lever for premium AI features over time. [14]
What to watch next
- Product milestones: Beta timing, markets for the initial Perplexity rollout, and how Snap differentiates My AI vs. Perplexity‑powered answers. [15]
- Monetization mix: How the $400M line complements ads and subscriptions—and whether Snap pursues additional AI partners as suggested by Spiegel. [16]
- Q4 delivery: Whether Snap lands within the $1.68B–$1.71B revenue guide and continues momentum in direct‑response ads into year‑end. [17]
Sources & further reading (published Nov. 6, 2025, unless noted)
- Snap shares surge on $400M Perplexity deal; Q4 guide details and privacy note. [18]
- Deal explainer: integration inside Snapchat chat, $400M structure, early‑2026 timing (press release, Nov. 5). [19]
- Analyst move: BMO Capital raises SNAP target to $13 (Outperform). [20]
- Additional context on user experience and timeline. [21]
- Q3 2025 results, user metrics, and $500M buyback (press release, Nov. 5). [22]
References
1. www.businesswire.com, 2. www.reuters.com, 3. www.investing.com, 4. www.businesswire.com, 5. www.businesswire.com, 6. www.reuters.com, 7. www.businesswire.com, 8. www.businesswire.com, 9. www.reuters.com, 10. www.businesswire.com, 11. www.reuters.com, 12. www.investing.com, 13. www.reuters.com, 14. techcrunch.com, 15. www.businesswire.com, 16. www.reuters.com, 17. www.reuters.com, 18. www.reuters.com, 19. www.businesswire.com, 20. www.investing.com, 21. www.businessinsider.com, 22. www.businesswire.com
