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Snap Inc. shares jumped 15% on Wednesday after the company posted third-quarter results that outperformed Wall Street expectations and announced a $500 million stock repurchase program. The upbeat forecast and a high-profile partnership with Perplexity AI, worth $400 million over one year, reignited investor optimism in the social-media platform that has faced stiff competition from rivals like Meta and TikTok.

Solid Q3 Performance

Snap reported $1.51 billion in revenue, surpassing analysts’ estimates of $1.49 billion, according to LSEG data. The company recorded a loss of 6 cents per share, while daily active users (DAUs) reached 477 million, slightly ahead of expectations. Its global average revenue per user (ARPU) came in at $3.16, up from $3.13 expected, reflecting steady ad-market recovery.

Sales grew 10% year over year, while net losses narrowed to $104 million, an improvement from $153 million in the same quarter last year. Adjusted EBITDA reached $182 million, beating the projected $125 million. For the fourth quarter, Snap expects adjusted EBITDA between $280 million and $310 million, well above consensus estimates of $255 million.

Despite a turbulent year that saw shares down 32% year-to-date, Wednesday’s earnings helped claw back some investor confidence.

AI Collaboration With Perplexity

In one of the most significant moves of the year, Snap announced a $400 million agreement with Perplexity AI, a fast-growing AI search startup often described as a challenger to Google. The deal, paid through a mix of cash and equity, will see Perplexity’s conversational search engine integrated directly into Snapchat by early 2026.

Snap CEO Evan Spiegel described the partnership as a “first step in transforming Snapchat into a platform where top AI firms can connect creatively and securely with users.”

Perplexity AI’s features will appear by default in users’ chat inboxes, offering real-time answers from credible sources and enabling users to explore new topics within the app. Although Snap won’t sell ads alongside Perplexity results, Spiegel said the collaboration could help drive paid subscriptions for Perplexity while expanding Snapchat’s ecosystem of AI-powered tools.

The integration will complement Snap’s existing My AI chatbot, which has been rolled out to millions of users worldwide.

Expansion, Regulation, and Monetization

Snap projected fourth-quarter revenue between $1.68 billion and $1.71 billion, slightly above Wall Street’s midpoint forecast of $1.69 billion. Yet, the company warned investors that global regulatory changes — particularly Australia’s new social-media minimum age law — may cause a decline in daily active users (DAUs) in Q4.

In its investor letter, Snap cautioned that “policy shifts around age verification” by Apple and Google could also impact engagement metrics. Apple’s platform-level age verification is already in rollout, while Google is expected to follow suit by 2026.

Spiegel said Snap remains committed to its long-term goal of reaching 1 billion global monthly active users, but acknowledged that “new regulations may cause temporary slowdowns in user growth in certain markets.”

Snap also continues to invest heavily in augmented-reality development. The company revealed plans to spin off its AR glasses division (Specs) into a separate subsidiary, allowing faster development in collaboration with hardware partners.

Industry Context

The upbeat report stands in contrast to Pinterest, whose shares tumbled after weaker-than-expected earnings earlier this week. Meanwhile, major ad-driven tech companies like Meta, Alphabet, and Amazon all posted robust results last week, showing renewed strength in the digital ad market.

• Meta’s ad revenue soared 26% year-over-year to $51.24 billion.
• Alphabet’s total advertising revenue rose 13% to $74.18 billion, with YouTube ads up 15% to $10.26 billion.
• Amazon’s online advertising unit generated $17.7 billion, up 24% from a year ago.
• Reddit also impressed investors, reporting $585 million in Q3 revenue, a 68% year-on-year jump.

These strong performances across the ad sector provide a favorable backdrop for Snap’s recovery, as advertisers return to social-media platforms following 2023’s slowdown.

Looking Ahead

Snap’s latest quarter reflects a company regaining its footing — tighter losses, healthy ad demand, and an ambitious AI roadmap. But challenges remain: new global regulations, fierce competition, and the need to scale monetization without hurting user engagement.

With its $500 million buyback, deepening AI partnerships, and improving margins, Snap is signaling to investors that it intends to balance innovation with discipline. If the Perplexity integration succeeds, it could redefine Snapchat as not just a messaging app, but an AI-driven discovery and information platform — a transformation Wall Street will be watching closely.