Snap Surges on Strong Q3 Earnings and $400M AI Deal
Snap Exceeds Q3 Expectations Amid AI Push and Regulatory Headwinds
Social media company Snap Inc. saw its shares jump 25% Wednesday after reporting stronger-than-expected third-quarter results and announcing a major artificial intelligence partnership.
Financial Performance Highlights
Snap's revenue reached $1.51 billion in Q3, surpassing the $1.49 billion consensus estimate. The company narrowed its net loss to $104 million, a 32% year-over-year improvement, while adjusted EBITDA of $182 million far exceeded the $125 million analyst forecast.
Key metrics showed resilience:
- Daily active users (DAUs): 477 million (vs. 476 million expected)
- Average revenue per user (ARPU): $3.16 (vs. $3.13 estimate)
The company projected Q4 revenue between $1.68-$1.71 billion, with midpoint guidance slightly above Wall Street expectations.
Strategic AI Partnership
Snap announced a $400 million deal with AI startup Perplexity to integrate conversational search capabilities into Snapchat. The technology, expected to launch in early 2026, will allow users to interact with AI through natural language queries.
"This partnership represents our commitment to transforming content discovery through AI," a Snap spokesperson said in the earnings release.
Regulatory Challenges Ahead
The company warned investors about potential headwinds from new global regulations:
- Australian Social Media Minimum Age Act (effective next month)
- Upcoming age verification tools from Apple and Google
- U.S. state laws in Utah and California taking effect in 2026
These measures may temporarily reduce DAU counts as platforms implement stricter age verification processes.
Industry Context
While Snap showed strength, competitor Pinterest saw shares drop on weak guidance. Other tech giants continue growing through AI investments:
- Meta: 26% revenue growth ($51.24B)
- Amazon: Advertising revenue up 24% ($17.7B)
- Alphabet: Total ad revenue rose 13% ($74.18B)
- Reddit: 68% revenue surge, 116M DAUs
Key Points:
- Snap beat Q3 estimates with $1.51B revenue and reduced losses
- $400M Perplexity AI deal aims to enhance Snapchat search functionality
- Regulatory changes may pressure user growth metrics in coming quarters
- Company authorized $500M stock repurchase program
- Tech peers show continued strength in advertising and AI infrastructure
