TLDRs:
- Snap ends major Perplexity AI partnership before rollout expansion
- Company removes Perplexity revenue from future financial guidance
- Snapchat user growth continues despite strategic AI shift changes
- Snap pivots toward internal AI and wearable computing investments
Snap has officially confirmed that its high-profile $400 million partnership with Perplexity AI has been terminated, marking a notable shift in its artificial intelligence strategy.
The agreement, first announced in late 2025, was designed to integrate Perplexity’s conversational AI search engine directly into Snapchat’s “Chat” interface, allowing users to ask questions and receive real-time AI-generated responses within the app.
However, the collaboration never reached full-scale deployment. While limited testing had begun with select users, Snap later acknowledged in February that both companies had not agreed on a path toward broader rollout. By the first quarter of 2026, the relationship was “amicably ended,” according to Snap’s earnings disclosure.
The original deal structure would have seen Perplexity pay Snap $400 million in a combination of cash and equity over a one-year period, with revenue contributions expected to begin in 2026.
Revenue Forecast Adjusted Downward
Following the termination, Snap confirmed that its financial outlook no longer includes any expected contribution from the Perplexity partnership. This adjustment signals a meaningful change in near-term revenue assumptions, particularly as the company had previously highlighted the deal as a potential growth driver in its AI strategy.
When first announced, Snap positioned the collaboration as part of its broader effort to enhance discovery and user engagement through artificial intelligence. At the time, executives expressed optimism that the integration would strengthen Snapchat’s conversational capabilities and unlock new monetization opportunities.
Despite the reversal, Snap emphasized that its overall sales trajectory remains stable, with the company continuing to focus on internal product improvements and platform growth rather than external AI integrations.
User Growth Continues Rising
Even as the AI partnership dissolves, Snap reported solid user growth across its platform. Snapchat’s global daily active users increased by 5% year-over-year, reaching 483 million. Monthly active users also climbed 5%, totaling 965 million globally.
The company attributed this steady expansion to ongoing product enhancements, including improved Snap Map functionality and increased engagement through its augmented reality Lenses. These features continue to play a central role in driving user retention and daily interaction.
Snap CEO Evan Spiegel highlighted that the company has returned to growth in daily active users while also improving revenue performance and expanding margins. He credited disciplined execution and product innovation as key drivers of recent performance.
Shift Toward AI Wearables Strategy
Looking ahead, Snap is increasingly focusing on long-term investments in intelligent hardware and augmented reality. The company reiterated its commitment to developing “Specs,” its next-generation smart eyewear project, which represents a major pillar of its future strategy.
Spiegel noted that Snap remains focused on disciplined execution while investing in long-term opportunities tied to wearable computing and AI-enhanced experiences. The company is expected to share further updates on its AR ambitions at the upcoming AWE event on June 16.
This strategic shift comes shortly after Snap disclosed a workforce reduction of approximately 16%, impacting around 1,000 employees. The company cited advancements in AI as a contributing factor, suggesting a broader restructuring as it reallocates resources toward future-focused initiatives.
While the Perplexity partnership’s collapse removes a potential near-term revenue stream, Snap appears intent on doubling down on its own ecosystem, betting that in-house AI and hardware innovation will define its next growth phase.
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