Snap Delivers Strong Q3 as Perplexity Deal Fuels 23% After-Hours Rally

Post by : Bianca Suleiman

Snap Inc. reported better-than-expected third-quarter results and announced a strategic tie-up with AI firm Perplexity that will embed Perplexity’s AI search into Snapchat, offering verified answers in-app and triggering a 23% surge in Snap shares after market close.

Under the agreement, Perplexity is slated to provide $400 million to Snap over the next year in a combination of cash and equity. While the companies expect revenue to begin contributing in 2026, the integration aims to sharpen Snap’s competitive edge against platforms such as TikTok and Meta’s Facebook and Instagram and to increase advertiser interest.

Snap’s third-quarter revenue rose 10% to $1.51 billion, exceeding analysts’ $1.49 billion projection. The company narrowed its net loss to $104 million from $153 million a year earlier, and daily active users grew 8% to 477 million worldwide, modestly above expectations and indicating durable audience expansion.

The firm highlighted expanded AI capabilities, including on-device creator tools that generate prompts for augmented reality lenses, broadening creative options. Revenue gains from direct-response ad formats — notably Pixel Purchase and App Purchase optimizations — climbed about 8%, reflecting sustained demand for targeted ad solutions.

Looking ahead, Snap warned fourth-quarter daily active users could decline as investment priorities shift and regulation evolves, including Australia’s Social Media Minimum Age bill taking effect in December. The company forecast fourth-quarter revenue between $1.68 billion and $1.71 billion, closely matching the $1.69 billion analyst consensus.