Snap Stock Surges 25% After $400M AI Deal and Strong Forecast

Snap is making a comeback. The social media company’s shares jumped as much as 25% on Wednesday after it reported stronger-than-expected quarterly earnings, announced a $500 million stock buyback, and revealed a landmark $400 million partnership with AI search startup Perplexity.

For the third quarter, Snap posted revenue of $1.51 billion, slightly above Wall Street’s $1.49 billion estimate, and a net loss of $104 million, down from $153 million a year earlier.

Global daily active users rose to 477 million, just topping projections, while average revenue per user climbed to $3.16. Adjusted EBITDA hit $182 million, beating expectations, and the company forecasts up to $310 million next quarter—well ahead of analyst targets. Snap projects fourth-quarter sales between $1.68 billion and $1.71 billion, with the midpoint slightly above consensus estimates.

The company’s most significant announcement was its deal with Perplexity AI, a fast-growing player in conversational search. Perplexity will pay Snap $400 million over one year, in a mix of cash and equity, to integrate its real-time search capabilities directly into Snapchat starting in early 2026. Users will be able to ask questions and receive live, sourced answers without leaving the app.

“We have a unique opportunity to help distribute AI agents through our chat interface,” CEO Evan Spiegel said, noting that Perplexity will have default placement in Snapchat’s chat inbox. Snap will not sell ads against Perplexity’s chatbot responses, but expects the integration to boost engagement and attract new users.

Snap is also spinning off its augmented reality glasses division, turning its Specs line into a standalone subsidiary to accelerate development with external partners. The next-generation glasses remain slated for a 2026 debut. Spiegel said the change will provide “more optionality” for collaboration and faster innovation.

Despite the upbeat results, Snap cautioned investors that regulatory headwinds may slow growth. In a letter to shareholders, the company said that new age-verification and child-safety laws in regions like Australia, Utah, and California could reduce daily active users in the near term.

Australia’s new minimum-age bill, for instance, will soon penalize platforms that allow users under 16. Similar laws in the U.S. will require app stores to verify ages starting next year. Snap also warned that some of its newer monetization efforts, like Snapchat+, could temporarily reduce engagement as they expand globally.

After losing 32% of its value earlier this year, Snap’s sharp rebound reflects renewed investor confidence that its AI partnerships, AR ambitions, and improving fundamentals may mark the beginning of a turnaround for the long-challenged social media firm.

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