Perplexity to pay Snap $400M to power search in Snapchat

Snap announced a strategic partnership with Perplexity, integrating its AI search engine into Snapchat's My AI chatbot, with Perplexity paying Snap $400 million in cash and equity, generating revenue for Snap starting in 2026. This deal was revealed alongside Snap's Q3 2025 results, which showed revenue growth of 10% to $1.51 billion and a narrowed net loss to $104 million, while its Snapchat+ subscription service surpassed 17 million users.

Analysis

Snap Inc. has entered a strategic partnership with Perplexity, integrating its AI search engine into Snapchat's My AI chatbot, with the new feature scheduled for early next year. This agreement includes a $400 million payment from Perplexity to Snap in cash and equity, with Snap beginning to record revenue from this deal in 2026. The collaboration grants Perplexity exposure to Snapchat's substantial user base of over 940 million.

The announcement coincided with Snap's Q3 2025 results, which reported a 10% year-over-year revenue increase to $1.51 billion. Furthermore, the company demonstrated improved financial health by narrowing its net loss to $104 million, down from $153 million in the previous year. These figures suggest positive momentum in Snap's core business operations.

Snapchat+'s subscription tier has surpassed 17 million users, indicating successful diversification of revenue streams beyond traditional advertising. The integration of advanced AI capabilities through the Perplexity deal, coupled with strong subscription growth, positions Snap for potential future engagement and monetization opportunities, contributing to the overall strongly positive sentiment surrounding the company.

Key Decisions for Investors

• Investors should closely monitor the successful integration of Perplexity's AI into Snapchat and its subsequent impact on user engagement and advertising revenue starting in 2026.
• Evaluate the continued growth trajectory of Snapchat+ subscribers and its contribution to Snap's profitability, especially in light of the recently narrowed net loss.
• Consider the long-term strategic value of AI partnerships for Snap's competitive positioning within the evolving social media and artificial intelligence sectors.