Snap ends $400M partnership with Perplexity

On Wednesday, social media company Snap revealed that it has amicably ended its partnership with AI search engine Perplexity. The deal, which was originally valued at $400M, was terminated during the first quarter of the year. Under the terms of the agreement, which was first announced last November, Perplexity was set to pay Snap $400 million in cash and equity over the course of one year. The partnership would have integrated Perplexity’s AI search engine directly into Snapchat’s “Chat” interface, allowing users to ask questions and receive conversational answers within the app. Although the integration was being tested with select users, Snap had previously noted in February that the two companies had yet to mutually agree on a path to a broader roll out. In its quarterly earnings report, Snap confirmed that its current sales guidance assumes no contribution from Perplexity, marking a definitive close to the relationship that began last year.

Alongside the partnership termination, Snap reported growth in its user base. Snapchat’s global daily active users (DAU) rose 5% year-over-year to 483 million, while monthly active users (MAU) also grew 5% to reach 965 million. The company attributed this user growth to the introduction of new features across the application, including Snap Map and its Lenses augmented reality filters. In the company’s latest earnings report, Snap CEO Evan Spiegel highlighted this performance, noting that during the first quarter, the company returned to growth in daily active users, accelerated its revenue growth, expanded its margins, and generated strong free cash flow.

Snap also addressed its broader operational strategy, noting a workforce reduction of roughly 16% of its global workforce, which impacts around 1,000 full-time employees. The company, which first announced the layoffs in April, cited advancements in artificial intelligence as the reason for the cuts. Despite these layoffs, the company remains focused on its long-term opportunities in Specs, Snap’s intelligent eyewear product.

“We remain focused on disciplined execution as we invest in Specs and our long-term opportunity in intelligent eyewear and look forward to sharing more at AWE on June 16th,” Spiegel said, referring to the upcoming Augmented World Expo (AWE).

Why it matters

The termination of the $400M partnership with Perplexity marks a shift in Snap’s strategy, as the company’s sales guidance now assumes no contribution from the AI search engine.