Snap Stock: Earnings Beat and Perplexity Partnership Drive After-Hours Rally

TLDR

• Snap reported Q3 earnings that beat Wall Street expectations with adjusted EPS of 10 cents versus expected 5 cents and revenue of $1.51 billion
• Stock jumped 15% in after-hours trading on the strong results and future guidance
• Company announced a partnership with Perplexity AI worth $400 million over one year to integrate AI search into Snapchat starting in 2026
• Snap authorized a $500 million stock buyback program
• Company warned that new age restrictions in countries like Australia may reduce daily active users in Q4

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Snap shares climbed 15% in after-hours trading Wednesday following Q3 earnings results that topped analyst estimates across multiple metrics. The Snapchat parent company delivered better-than-expected revenue and earnings while announcing a major AI partnership.

Snap Inc., SNAP

The company posted adjusted earnings-per-share of 10 cents. Analysts had projected just 5 cents. Revenue reached $1.51 billion, beating the consensus estimate of $1.49 billion and exceeding Snap’s own guidance range.

Adjusted EBITDA came in at $182 million. Wall Street had expected $125 million. Global daily active users hit 477 million, slightly above the 476 million forecast.

Perplexity Deal Brings AI Search to Snapchat

The company announced a partnership with Perplexity AI that will integrate the startup’s conversational search directly into Snapchat’s chat interface. The feature launches in early 2026.

Perplexity will pay Snap $400 million over one year through a combination of cash and equity. Revenue from the deal starts contributing in 2026 as the global rollout progresses.

CEO Evan Spiegel said Perplexity will have default placement in Snap’s chat inbox. The startup will control responses from their chatbot inside Snapchat. While Snap won’t sell advertising against Perplexity responses, the integration helps Perplexity drive additional subscribers.

Snap also authorized a $500 million stock repurchase program. The company said it plans to create a separate subsidiary for its Spectacles AR glasses to accelerate development with partners.

Guidance Tops Expectations Despite User Headwinds

Fourth-quarter revenue guidance came in between $1.68 billion and $1.71 billion. The midpoint of $1.695 billion edges above Wall Street’s $1.69 billion estimate.

Adjusted EBITDA for Q4 is projected between $280 million and $310 million. Analysts expected $255.4 million.

Third-quarter sales grew 10% year-over-year. The company posted a net loss of $104 million, narrower than the $153 million loss in the same period last year.

Global average revenue per user reached $3.16. Estimates called for $3.13.

The company warned investors about potential user declines. New age restrictions in countries like Australia may reduce engagement metrics. Australia’s social media minimum age bill passed in November 2024.

The law takes effect next month. Companies face penalties if they fail to prevent users under 16 from having accounts. Snap expects overall daily active users may decline in Q4 given these factors.

Snap also noted platform-level age verification from Apple and Google could impact future user metrics. Utah’s age verification law takes full effect in May 2026. The company’s Snapchat+ subscription service may also affect engagement metrics as it rolls out globally.

Snap shares were down 32% year-to-date through Wednesday’s close. The stock frequently experiences large price swings following earnings reports.

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