(MENAFN- AsiaNet News)

• Snap is set to receive $400 million from Perplexity over a year, through a combination of cash and equity, beginning in 2026.
• Daily active users (DAUs) increased 8% YoY to 477 million in Q3 and monthly active users (MAUs) climbed 7% to 943 million. 
• The company's board approved a $500 million stock buyback program.

Snapchat parent Snap, Inc.'s (SNAP) shares jumped nearly 15% in Wednesday's extended session after the social media company announced a partnership with artificial intelligence (AI) startup Perplexity AI. Snap also reported better-than-expected quarterly results and announced a buyback program.

Snap stock, however, is down over 32% year-to-date.

Snap's Perplexity Deal

Santa Monica, California-based Snap said that through the partnership, Perplexity's AI-powered answer engine will be directly integrated into Snapchat, beginning in early 2026. This gives“Snapchat's community of nearly 1 billion monthly active users a new way to ask questions, explore topics they care about, and learn about the world,” the companies said.

“Under the agreement, Perplexity will pay Snap $400 million over one year, through a combination of cash and equity, as we achieve global rollout. Revenue from the partnership is expected to begin contributing in 2026,” a statement read.

CEO Evan Spiegel sees the partnership as fulfilling the company's goal of making“AI more personal, social, and fun – woven into the fabric of your friendships, Snaps, and conversations.”

Perplexity CEO Arvind Srinivas said,“Millions of people connect and discover the world through Snapchat. By bringing Perplexity to Snapchat, we're able to serve that curiosity directly where it occurs.”

The Perplexity partnership comes at a time when Snap is struggling with losses amid competition from larger peers and a less robust advertising environment. Incidentally, Perplexity had offered to buy Google's Chrome, while it was feared that the search giant might have to divest the browser as part of an antitrust case. Google has since then been cleared to keep its browser.

Snap Q3 Results

For the third quarter of the fiscal year 2025, Snap reported a net loss of $0.06 per share, narrower than the year-ago's $0.09. Quarterly revenue climbed 10% year over year (YoY) to $1.51 billion. The results were better than the consensus estimates, which forecast a loss of $0.12 per share and revenue of $1.49 billion, according to Stocktwits. The revenue growth was aided by growth in direct response advertising revenue, underpinned by strong demand for its“Pixel Purchase” and“App Purchase” ad optimization tools, as well as continued strength from the small and medium business (SMB) segments, according to Koyfin's transcript.

The adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased to $182 million from $132 million, and the company generated free cash flow of $93 million compared to the $72 million in the year-ago quarter. Among user metrics, daily active users (DAUs) increased 8% YoY to 477 million, and monthly active users (MAUs) climbed 7% to 943 million. 

Snap's Capital Return To Shareholders

The company said its board has authorized a stock buyback program worth up to $500 million.“The goal of the program is to utilize the company's strong balance sheet to opportunistically offset a portion of the dilution related to the issuance of restricted stock units to employees as part of the overall compensation program designed to foster an ownership culture,” Snap said.

Snap's Q4 Outlook

On the earnings call, CFO Derek Andersen said fourth-quarter revenue is expected to be between $1.68 billion and $1.71 billion, versus the Fiscal estimate of $1.69 billion. He also flagged a modest sequential rise in infrastructure cost. It guided adjusted EBITDA to $280 million to $310 million. The company further lowered its full-year adjusted operating expenses guidance to the low end of its previous range of $2.65 billion to $2.7 billion.

What Retail Feels About SNAP After Q3 Print

Snap was among the top five trending equity tickers on Stocktwits as of late Wednesday, with retail sentiment toward the stock shifting to 'extremely bullish' from 'bearish' a day ago and the message volume over the 24 hours spiking by over 800%.

SNAP sentiment and message volume as of 10:20 p.m. ET, Nov. 5 | source: Stocktwits

A bullish watcher expressed satisfaction over the results, stating that“If they actually made some money, we'd be really going higher, but I'll take it.”

Another user called it a“turnaround” quarter and said they expect the stock to open above $9 and reach $10 on Thursday.

According to Koyfin, the average analyst price target for Snap stock is $9.23, implying over 26% upside from its Wednesday closing price.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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