Snap's Perplexity deal is an effort to diversify revenue as ad trends weaken: analysts

[Snapchat Shares Jump On Strong Earnings Report]
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Shares of Snap Inc. (SNAP [https://seekingalpha.com/symbol/SNAP]) have pared their postmarket gains from Wednesday and are currently up about 12% on Thursday before midday.

The company exceeded expectations for top-and-bottom line numbers and most key metrics in the third quarter and notably announced a new $400M partnership with Perplexity to integrate an AI search chatbot into Snapchat.

"As SNAP struggles to generate advertising growth, the company is creatively leaning into subscription and a smart promotional partnership with Perplexity," Oppenheimer said in their immediate reaction to the news.

Oppenheimer analysts believe while the partnership adds to revenue at more than 90% margins, they expect it to decline quickly over a few years once benefits are harvested.

"The deal broadens Snap’s revenue mix, reduces ad dependence, and better positions the platform as a distribution platform for consumer Gen-AI products," Bank of America said in its note. "Snap indicated more partnerships are possible over time, a positive for revenue growth and the stock."

However, they pointed out that advertising still represents over 80% of total revenue for Snap, and growth rates reflect intensifying competition and sluggish usage trends.

KeyBanc Capital Markets said the Perplexity deal was "arguably the bigger surprise," as the company lays groundwork to become a distribution channel for more AI assistants.

"We believe this shows Snap is exploring more ways to monetize its audience," KeyBanc said.

MORE ON SNAP

* Snap Inc. (SNAP) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4838730-snap-inc-snap-q3-2025-earnings-call-transcript]
* Snap Inc. 2025 Q3 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4838662-snap-inc-2025-q3-results-earnings-call-presentation]
* Snap: Still Unprofitable, Still Not Worth The Risk [https://seekingalpha.com/article/4833705-snap-still-unprofitable-still-not-worth-the-risk]
* Snap aims for $1.68B–$1.71B Q4 revenue while unveiling AI partnerships and AR advances [https://seekingalpha.com/news/4516767-snap-aims-for-1_68b-1_71b-q4-revenue-while-unveiling-ai-partnerships-and-ar-advances]
* Snap stock soars after strong Q3 report, $400M Perplexity partnership [https://seekingalpha.com/news/4516403-snap-stock-soars-after-strong-q3-report-400m-perplexity-partnership]