Snap Inc. just staged one of its most dramatic turnarounds in recent memory. As a result, Snap share price jumped 14% in a single day, fueled by stronger-than-expected earnings and a headline-grabbing partnership with Perplexity AI.
For years, Snap has been the quiet struggler of social media, losing ad budgets to giants like Meta and TikTok, while trying to stay relevant with its young audience. But this quarter, something changed. Snap not only beat estimates, it also signaled that it is ready to compete in the fast-growing AI landscape.
The company’s bold $400 million collaboration with Perplexity AI, combined with a clear improvement in its ad business, helped shift the market narrative almost overnight. Let’s break down what happened with Snap Earnings that made the stock rally.
Snap Earnings: The Numbers That Turned Heads
Snap’s latest results showed the strongest growth the company has seen in more than a year. The company’s revenue for the quarter came in at about $1.51 billion, monthly active users climbed to 943 million, while advertiser participation and engagement trends improved across all major regions.
Earlier in the year, Snap had already hinted at recovery which gave investors confidence that Snap’s ad optimisation strategy is working. From a profitability lens, adjusted EBITDA more than doubled, and free cash flow more than tripled.
| Metric (Q3 FY25) | Value | YoY Growth |
| Revenue | $1.51 billion | +10% |
| Daily Active Users | ~477 million | +8% |
| Adjusted EBITDA | $182 million | +38% |
| Free Cash Flow | $93 million | +30% |
For a company long known for cash burn and flat user growth, these numbers sent a strong signal that its turnaround efforts are beginning to stick.
Snap-Perplexity AI Deal: The Bet on Smart Search
The real headline, however, was Snap’s partnership with Perplexity AI, a fast-growing startup known for its conversational search engine. Under a $400 million agreement, Perplexity’s AI will be integrated directly into Snapchat by 2026, allowing users to ask real-time questions and get verified, AI-generated responses within the app.
This move carries multiple implications:
- New revenue streams: It opens doors for AI-powered ads, search tools, and premium experiences beyond Snap’s core ad model.
- Product stickiness: AI features could increase user engagement and time spent in-app — valuable metrics for advertisers.
- Competitive signalling: By embracing AI early, Snap joins the same innovation conversation as Meta, OpenAI, and Google, not as an imitator but as a partner in the AI ecosystem.
For investors, this deal wasn’t just symbolic. It showed that Snap can still surprise the market with big, forward-looking bets.
Why is Snap Stock Rising?
Snap share price surged more than 14% in pre-market trade on October 6, according to Google Finance. Several intertwined factors triggered this sharp rally:
- An earnings beat that revived confidence after a stretch of uneven results.
- User growth that outpaced expectations in key geographies.
- Improved cash generation, reducing long-standing balance-sheet concerns.
- The Perplexity AI partnership, which gave the market a fresh growth story.
- Short covering and renewed sentiment, as traders re-rated Snap’s prospects in the short term.
As reported by Reuters, Snap shares surged as much as 23% in after-hours trading as well, later settling at a 14% gain, its biggest single-day jump in over a year. It is worth noting that YTD, the stock has fallen around 35%.
What Investors Should Watch Next
While optimism is back in Snap stock, several challenges remain on the radar:
- Ad spending pressure: The global advertising market remains cautious, with brands still trimming budgets.
- Execution risk: Integrating AI features takes time and could increase short-term costs.
- Profitability gap: Snap remains loss-making on a net basis, and scaling AI infrastructure may delay breakeven.
- High expectations: A single quarter won’t erase years of volatility; future earnings will determine if this momentum holds.
Investors will want to track three signals: ad efficiency, user engagement, and early signs of monetisation from the AI integration.
The Bigger Picture for Indian Investors
For investors in India exploring US-listed AI & tech stocks, Snap’s rally offers a useful case study. It shows how AI adoption is becoming a core driver of value, not just for big tech, but also for mid-sized platforms reinventing themselves.
Snap’s push into AI aligns it more closely with the growth themes driving global capital flows: personalised search, digital ads, and creator economy tools. For portfolio builders seeking AI exposure beyond the usual giants, Snap’s evolution could be worth tracking.
Snap’s 14% leap was a result of better earnings, stronger user growth, and a smart bet on Perplexity AI. However, the company still has work to do. If Snap sustains this momentum, 2025 could mark the year it stopped surviving, and started evolving.
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