Snap announces AI search powered by $400 million Perplexity deal, and its stock price soars

Snap has never been shy when it comes to embracing new technology, and its partnership with Perplexity will help it continue its forward march. The parent company of Snapchat and the AI firm known for its contextual answer engine are joining forces to bring an AI-powered search function to users around the world.

The announcement of the Perplexity partnership came amidst Snap’s earnings report for the third quarter of 2025. Snap representatives said that Perplexity will pay $400 million to incorporate its engine into the Snapchat app. That integration will come in the form of a chat window, through which a bot will provide AI-generated answers to user prompts.

Revenue generated from the deal is expected to begin showing in Snap’s 2026 earnings reports. “Our goal is to make AI more personal, social, and fun – woven into the fabric of your friendships, Snaps, and conversations,” Snap CEO Evan Spiegel said in a statement. “This partnership reflects our shared vision for the power of AI to enhance discovery and connection on Snapchat, and we look forward to collaborating with more innovative partners in the future.”

Snap was an early adopter of conversational AI through My AI, a bot that drew a negative reception from the public shortly after its 2023 launch. In the time since, attitudes have changed. In its Q1 2025 earnings report, Snap said that My AI usage was up 55% year-over-year.

These days, AI-powered search is everywhere: Instagram provides it through chatbots, Meta wants to build more of it, and TikTok went straight to the source with a ChatGPT partnership. Ever since OpenAI threw a wrench into the search business, everyone wants a piece — and for Snap, that means a partnership with Perplexity is in order.

As for the rest of Snap’s Q3 2025 earnings report? It was mostly filled with good news. Quarterly revenue rose 10% year-over-year to reach $1.51 billion, while the number of daily active users on Snapchat grew to 477 million. Both of those numbers exceeded analyst projections. The strong quarter, when combined with the promise of the Perplexity partnership, caused Snap’s stock price to rise 25%  during after-hours trading.

Snap execs credited several in-app features as key drivers of year-over-year growth. The TikTok-like Spotlight format has received significant investments, and it is thriving. Compared to last year, four times as much Spotlight traffic is coming on content posted in the last 24 hours, reflecting improvements to the app’s recommendation engine. The Snap Star program was another catalyst, as it continues to include more of the app’s top earners.

But the most impressive stat of all concerns Snap’s OG format: Its users created one trillion selfie Snaps in 2024. Even with all of the app’s innovation, its most basic elements are still commanding attention.