Snap pulls plug on $400M Perplexity deal during AI spending surge
Synopsis
Snap has ended its planned $400 million partnership with Perplexity AI during a quarter marked by stronger revenue and rising global users. The cancelled agreement comes as technology companies reassess AI spending, advertising performance, and operational costs while continuing investments in artificial intelligence tools and infrastructure across digital platforms.
Snap ended its Perplexity AI partnership during a quarter of revenue growth, rising users, restructuring efforts, and continued investment in artificial intelligence infrastructure and platform operations.
Key Highlights
- Snap ended its $400 million partnership with Perplexity AI during the first quarter of 2026.
- The company reported 12% revenue growth and narrower quarterly losses despite the cancelled agreement.
- Snapchat daily active users increased to 483 million globally during the reported quarter.
- Snap continues restructuring operations while increasing spending on artificial intelligence infrastructure and engineering.
The Snap Perplexity deal has ended months after Snap announced plans to bring Perplexity AI’s conversational search tools into Snapchat.
The company disclosed the update in its first-quarter 2026 earnings report, saying the partnership was “amicably ended” during the quarter.
The development was first reported by TechCrunch following Snap’s earnings release on May 6.
The original agreement, announced in late 2025, was valued at $400 million over one year through a combination of cash and equity tied to broader AI integration plans inside Snapchat’s messaging platform.
AI Spending Faces Closer Scrutiny
The end of the Snap Perplexity deal comes as technology companies continue reviewing large artificial intelligence spending commitments against revenue growth and advertising performance.
Reports linked the cancellation to product alignment issues during development discussions. Snap also confirmed that future financial guidance no longer includes revenue connected to the agreement.
The planned integration would have allowed Snapchat users to search for answers and recommendations directly inside chats using Perplexity AI technology.
The feature was expected to roll out gradually across several international markets where Snapchat maintains a large Gen Z user base, including India, Europe, Australia, and North America.
Revenue Climbs Despite Partnership Exit
Snap reported first-quarter revenue of $1.53 billion, up 12% from a year earlier. Net loss narrowed to $89 million from $140 million in the same period last year, while adjusted EBITDA reached $233 million.
Daily active users rose 5% year over year to 483 million globally. Monthly active users climbed to 965 million, supported by engagement across Spotlight videos, Snap Map, and augmented reality features.
Advertising revenue increased 3% to $1.24 billion. Snap said advertising demand weakened during March due to geopolitical tensions in the Middle East, affecting quarterly revenue by an estimated $20 million to $25 million.
Restructuring Continues Across Social Media
The Snap Perplexity deal ended during a broader restructuring phase for the company. Snap recently confirmed layoffs affecting around 1,000 employees, or nearly 16% of its workforce, as it shifts spending toward AI infrastructure and engineering operations.
The move also reflects a wider trend across social media companies, where firms continue balancing AI investments with slowing digital advertising growth and rising operating costs in 2026.
FAQs
Q1. Why did Snap end its partnership with Perplexity AI?
Snap said the partnership ended amicably during the first quarter, with reports pointing to product alignment and rollout challenges.
Q2. What was the Snap Perplexity deal supposed to include?
The agreement aimed to integrate Perplexity AI’s conversational search tools directly into Snapchat’s chat and discovery features.
Q3. How did Snap perform financially after ending the deal?
Snap reported first-quarter 2026 revenue of $1.53 billion, with daily active users rising to 483 million globally.
Q4. Is Snap still investing in artificial intelligence projects?
Yes. Snap said it continues investing in AI infrastructure, engineering, and augmented reality tools despite ending the Perplexity partnership.
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Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
