Snap Strikes $400 Million Deal with Perplexity AI to Power Conversational Search Inside Snapchat

Snap Inc said on Wednesday it has struck a $400 million partnership with AI search start-up Perplexity AI, agreeing to embed Perplexity’s conversational search engine as the default provider inside Snapchat beginning in 2026.

The agreement, a mix of cash and equity that Snap says will be recorded as revenue starting next year, sent Snap shares sharply higher in after-hours trading.

Under the deal, Perplexity’s engine will supply answers to user queries inside Snapchat’s chat interface while Snap’s own My AI chatbot remains available. The tie-up gives Perplexity distribution across Snapchat’s nearly 943 million monthly and 477 million daily active users and gives Snap a new revenue stream and product line as it pushes deeper into AI-driven conversational features.

Deal in Detail

Snap said Perplexity will pay $400m over a one-year period via cash and equity; revenue recognition will begin in 2026.

The integration will be rolled into the app “early next year,” according to Snap CEO Evan Spiegel, who said the company expects Perplexity to hold primary placement while still offering Snap’s existing chatbot. Snap flagged that Perplexity will control the responses delivered by its engine and that those responses will not be used as ad inventory.

The announcement came alongside Snap’s third-quarter results: revenue of $1.51 billion (up 10% year-on-year), a narrowed loss of $104 million, and guidance for Q4 revenue of $1.68–$1.71 billion. Snap also reported 17 million Snapchat+ subscribers and reiterated ambitions to reach one billion monthly users.

Risks & Open Questions

Perplexity, which has more than 20 million active users, faces legal headwinds, the company has been sued by multiple platforms over allegations it violated terms of service by scraping content.

Observers also noted uncertainty about the longer-term compute and content-moderation costs of routing search through an external AI engine, and whether the arrangement will scale profitably for Snap.

The deal was broadly read as a quick route for Snap to enrich its conversational and search capabilities without building a full search stack in-house; RBC and other analysts noted the potential for heavy compute costs but also the strategic value of adding differentiated AI features to compete with Meta and TikTok for user attention and advertiser dollars.