Snap shares went up 15% on Wednesday. The company did better than expected in the third quarter. They also made a big deal with Perplexity AI.
This deal means Snap will use advanced AI search tools. It’s a big step for Snap.
Key Takeaways
- Snap stock climbed 15% following strong Q3 earnings
- Company secured $400 million Perplexity AI partnership
- Global daily active users reached 477 million
- Announced $500 million stock repurchase program
- Revenue exceeded analyst predictions at $1.51 billion
Earnings Beat Expectations
Snap did well in many areas:
- Revenue: $1.51 billion vs. $1.49 billion expected (LSEG)
- DAUs: 477 million vs. 476 million expected (StreetAccount)
- ARPU: $3.16 vs. $3.13 expected
- EPS: Loss of 6 cents (not directly comparable to estimates)
The company grew 10% in revenue year-over-year. They also cut their net loss to $104 million from $153 million last year.
Adjusted EBITDA was $182 million, more than expected.
A $400M AI Partnership That Could Redefine Snapchat
Snap made a big deal with Perplexity AI. They will add Perplexity’s search engine to Snapchat in early 2026.
According to Snap’s investor letter:
“Perplexity will pay Snap $400 million over one year, through a combination of cash and equity, as we achieve global rollout.”
Snap CEO Evan Spiegel said Perplexity will get a special spot in Snapchat’s chat inbox. They will control the chatbot responses.
Snap won’t make money from ads with Perplexity. But, Spiegel thinks it will help Perplexity get more subscribers.
This deal is the first step for Snapchat to be a place for AI agents. It uses Snapchat’s big user base.
Outlook: Solid Guidance Despite Regulatory Pressures
Snap expects to make between $1.68 billion and $1.71 billion in the fourth quarter. This is a bit more than what people thought.
They also think they will make between $280 million and $310 million in adjusted EBITDA. This is more than expected.
But, Snap sees some challenges:
- New rules, like Australia’s age law for social media, might make users less active.
- Apple and Google’s age-check systems could also hurt user numbers.
- Features like Snapchat+ might make users less active as they grow worldwide.
Snap thinks DAUs might go down in Q4 because of these issues.
Investor Reaction and Market Context
Snap shares have dropped 32% this year. They did not do as well as the Nasdaq.
After the earnings, the stock went up to 25% in after-hours trading. But, it went back down when the CFO talked about sales problems, especially in North America.
Still, Snap is doing well compared to others in digital ads:
- Meta: +26% revenue growth
- Amazon Ads: +24%
- Alphabet Ads: +13%
- YouTube Ads: +15%
- Reddit: +68% revenue surge
Snap says people all over the world want to use their ads. Especially small and mid-sized businesses. But, their North America business is still a problem.
Conclusion
Snap’s third-quarter results show a big step forward.
The company beat earnings expectations and gave good guidance. It also partnered with Perplexity AI, which could bring in new money and make Snapchat’s tech better.
But, there are still challenges like rules and keeping users interested. Yet, investors seem to believe in Snap’s future. They see it as a leader where social media meets AI.