Perplexity AI Strikes $400M Deal with Snap

In a bold move to supercharge its AI capabilities, Snap Inc. announced a landmark $400 million partnership with Perplexity AI on Wednesday, sending shares of the social media giant soaring 9% in after-hours trading. The deal, which integrates Perplexity’s cutting-edge search engine directly into the Snapchat app, marks a pivotal shift for Snap as it seeks to diversify revenue streams beyond advertising in a tightening market.

Under the agreement, Perplexity will pay Snap $400 million over the next year through a mix of cash and equity, with revenue recognition slated to begin in 2026. Snapchat users will gain seamless access to Perplexity’s real-time, citation-backed answers within the app, complementing Snap’s existing My AI chatbot.

This upgrade promises to transform casual scrolling into interactive discovery, allowing users to explore topics, fetch credible insights, and uncover trends without leaving the platform. “We’re excited to bring Perplexity’s powerful search to our community, making Snapchat an even smarter hub for real-time knowledge,” said Snap CEO Evan Spiegel in a statement.The partnership couldn’t come at a more opportune time for Snap, which reported robust third-quarter results alongside the announcement, including a 15% year-over-year revenue jump to $1.37 billion.

However, the company has faced headwinds from reduced U.S. ad spending by major brands, prompting analysts to hail the Perplexity tie-up as a “game-changer” for alternative monetization. Deutsche Bank analyst Benjamin Black noted in a research note that the deal echoes strategies seen in platforms like Pinterest, positioning Snap to capture value from AI-driven user engagement.

For Perplexity AI, the collaboration underscores its meteoric ascent in the generative AI arena. Founded in 2022 as a challenger to Google’s search dominance, the startup has raised funds at breakneck speed, ballooning its valuation from $500 million in early 2024 to a staggering $20 billion by September 2025—following a $200 million infusion just months after hitting $18 billion. Investors, including heavyweights like Accel and IVP, are betting big on Perplexity’s ability to redefine information retrieval with AI, despite whispers of acquisition interest from tech titans like Apple and Meta.

CEO Aravind Srinivas has repeatedly emphasized independence, telling the Financial Times in April that the company serves 30 million users and shows no signs of slowing.This Snap deal arrives amid broader AI fervor, with Perplexity recently rolling out finance-specific tools like live earnings call audio and insider trading trackers, enhancing its appeal to professionals in sectors from Wall Street to Silicon Valley.

As the AI search market—projected to swell from $16.3 billion in 2024 to $50.9 billion by 2033—continues to bubble, Perplexity’s relentless fundraising and strategic alliances signal a new era where startups aren’t just raising capital; they’re reshaping entire ecosystems.Snap’s stock closed the day up 9%, reflecting investor enthusiasm for the AI infusion.

With Perplexity’s valuation whispers now reaching as high as $50 billion in ongoing talks, the question lingers: Is this the dawn of sustainable AI innovation, or the peak of a frothy bubble? One thing’s clear—Perplexity is no longer just searching for answers; it’s writing the script for the next tech chapter.

Naorem Mohen

Naorem Mohen is the Editor of Signpost News. Explore his views and opinion on X: @laimacha.