Snap shares surge as $400 million Perplexity deal rekindles AI ambitions

(Reuters) -Snap shares jumped 18% in premarket trading on Thursday after its $400 million partnership with startup ​Perplexity AI reassured investors that the social media company could catch ‌up to larger rivals in the artificial intelligence race.

The Snapchat parent’s shares had risen 16%‌ after market hours on Wednesday following the news.

Perplexity’s artificial intelligence-powered search engine will be integrated into Snapchat, to better position it against rivals such as TikTok and Meta that are preferred by global marketers.

“Compute ⁠cost implications over time are ‌unclear, but it’s wild to think about Snap actually delivering something that approaches Meta AI on a relative ‍shoestring budget,” RBC analysts said.

CEO Evan Spiegel said responses to user queries would be controlled by Perplexity through their chatbot inside Snapchat and would not be ​used to sell advertisements.

Revenue from the deal is expected to start reflecting ‌in 2026, with the startup set to pay Snap $400 million over a one-year period through a combination of cash and equity.

On Wednesday, Snap beat analyst estimates for third-quarter revenue and forecast fourth-quarter revenue between $1.68 billion and $1.71 billion, compared with analyst ⁠estimates of $1.69 billion, according ​to data compiled by LSEG.

Snap’s results follow ​reports of upbeat quarterly revenue from Meta, Alphabet and Reddit.

Pinterest , however, ‍missed fourth-quarter ⁠revenue estimates on Tuesday and flagged concerns about softer ad spending in the U.S. and Canada as tariff costs weigh on marketing ⁠budgets.

Up to last close, Snap had lost 32% this year, while Pinterest ‌was down about 11%.

(Reporting by Kanchana Chakravarty in ‌Bengaluru; Editing by Sahal Muhammed)