Snap confirms $400M Perplexity AI deal ended amicably in Q1

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Snap confirms $400M Perplexity AI deal ended amicably in Q1

Snap confirmed on Wednesday that its $400 million partnership with AI search startup Perplexity has been terminated, revealing the news as part of its first-quarter earnings report. The deal, originally announced in November 2024, was set to integrate Perplexity’s conversational AI search engine directly into Snapchat’s Chat interface. Under the agreement, Perplexity was to pay Snap $400 million in cash and equity over one year. Snap stated that the companies “amicably ended the relationship in Q1” and that its sales guidance moving forward “assumes no contribution from Perplexity.”

What the deal was supposed to deliver

When Snap first unveiled the partnership during its third-quarter earnings call last year, executives projected that revenue from the deal would begin contributing to financial results in 2026. The integration would have allowed Snapchat users to ask questions and receive conversational, AI-generated answers directly within the app’s Chat interface, positioning Snap to compete with other social platforms embedding generative AI tools. Snap CEO Evan Spiegel said at the time that the deal reflected the company’s vision to use AI to enhance discovery on Snapchat and expressed interest in collaborating with more innovative partners in the future.

Snapchat user growth and broader business trends

Despite the collapse of the Perplexity deal, Snap reported steady user growth in Q1. Snapchat’s global daily active users (DAU) rose 5% year-over-year to 483 million, while monthly active users (MAU) also grew 5% to reach 965 million. The company attributed this growth to new features across the app, including Snap Map enhancements and its popular Lenses AR filters. Spiegel highlighted the company’s operational performance in a press release: “In Q1, we returned to growth in daily active users, accelerated revenue growth, expanded margins, and generated strong free cash flow.”

Workforce reduction and strategic pivot

The end of the Perplexity deal comes amid a broader restructuring at Snap. In April, the company announced layoffs affecting roughly 16% of its global workforce, impacting about 1,000 full-time employees. Snap cited advancements in artificial intelligence as a reason for the cuts, signaling a shift in how the company allocates resources. Spiegel also emphasized Snap’s long-term bet on intelligent eyewear, noting the company is investing in its Specs product line and plans to share more details at the AWE conference on June 16th.

Why this matters

The termination of a high-profile, $400 million deal raises questions about the viability of large-scale AI partnerships in social media. For Perplexity, losing Snap as a distribution channel means losing access to millions of potential daily users. For Snap, walking away from a significant revenue stream suggests either a strategic realignment or unresolved issues with the partnership’s terms. The development also highlights the volatility of AI integration deals in the current tech landscape, where companies are rapidly experimenting with generative AI but also reassessing costs and priorities. Perplexity did not immediately respond to Bitcoin World’s request for comment.

Conclusion

Snap’s decision to end its $400 million deal with Perplexity marks a notable shift in its AI strategy. While the company continues to grow its user base and invest in augmented reality and smart eyewear, the abandoned partnership underscores the challenges of monetizing AI features within social platforms. Investors and industry observers will be watching closely to see how Snap replaces that lost revenue and whether Perplexity finds new distribution partners.

FAQs

Q1: Why did Snap and Perplexity end their deal?
Snap said the relationship ended amicably in Q1 but did not provide specific reasons. The termination was disclosed in Snap’s quarterly earnings report, which also noted that future sales guidance excludes any contribution from Perplexity.

Q2: How much was the Snap-Perplexity deal worth?
The deal was valued at $400 million, to be paid by Perplexity to Snap in a combination of cash and equity over one year. It was originally announced in November 2024.

Q3: Is Snapchat still growing?
Yes. Snap reported 483 million daily active users in Q1 2026, up 5% year-over-year. Monthly active users also grew 5% to 965 million. Growth was driven by features like Snap Map and AR Lenses.

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