Snap shares exploded 25% Wednesday after the social media company crushed Q3 expectations and announced a game-changing $400 million partnership with Perplexity AI to integrate conversational search into Snapchat. The deal signals a major shift in how social platforms are betting on AI to drive future growth.
Snap just delivered the kind of earnings surprise that sends Wall Street into overdrive. The Snapchat parent's stock rocketed 25% after posting third-quarter revenue of $1.51 billion, beating analyst expectations of $1.49 billion, while announcing a blockbuster AI partnership that could reshape social search forever.
The real showstopper? Perplexity AI will pay Snap $400 million over one year through cash and equity to integrate its conversational search directly into Snapchat starting early 2026. It's the kind of deal that makes you wonder if we're witnessing the next chapter in social media evolution.
"This represents a first step in Snap's effort to make Snapchat a platform where leading AI companies can connect with its global community," the company told investors in its earnings letter. Translation: Snap wants to become the Switzerland of AI integration, letting startups plug into its 477 million daily active users.
The numbers tell a compelling turnaround story. Snap's adjusted EBITDA hit $182 million, crushing StreetAccount's $125 million projection. Global average revenue per user climbed to $3.16, ahead of the $3.13 estimate. Even the company's net loss improved to $104 million from $153 million in the same quarter last year.
But it's the forward-looking guidance that has investors most excited. Snap projects Q4 sales between $1.68-$1.71 billion, with the midpoint slightly ahead of Wall Street's $1.69 billion expectation. More impressive: adjusted EBITDA guidance of $280-$310 million absolutely demolishes analyst projections of $255.4 million.
The Perplexity partnership goes beyond just search integration. While Snapchat users can still chat with Snap's existing My AI chatbot, the Perplexity feature will offer "real-time answers from credible sources" and help users "explore new topics within the app." Think of it as turning Snapchat into a discovery engine powered by AI.
CEO Evan Spiegel's timing couldn't be better. While competitors like Pinterest crashed Tuesday on weak guidance and tariff concerns, Snap is positioning itself as the AI-friendly platform of choice. The contrast is stark - Pinterest's CFO Julia Donnelly warned of "broader trends and market uncertainty," while Snap is cutting massive revenue-sharing deals with hot AI startups.
