TLDR
- Snap reported Q3 adjusted earnings of 10 cents per share, beating the 5-cent analyst consensus by 100%
- Revenue of $1.51 billion exceeded expectations while adjusted EBITDA reached $182 million versus $125 million forecast
- Stock climbed 15% in after-hours trading following the earnings release and forward guidance
- Perplexity AI partnership worth $400 million will integrate conversational search into Snapchat beginning in 2026
- Company authorized $500 million buyback but warned Australia’s age restrictions may impact Q4 user numbers
Snap shares surged 15% in extended trading Wednesday after the company reported third-quarter results that blew past Wall Street forecasts. The social media company also unveiled a major AI partnership that will reshape its chat experience.
The Snapchat parent posted adjusted earnings of 10 cents per share. Analysts had expected just 5 cents. Revenue came in at $1.51 billion, topping the $1.49 billion consensus and exceeding the company’s own guidance.
Adjusted EBITDA reached $182 million. That crushed the $125 million projection. Daily active users totaled 477 million, edging out the 476 million estimate.
The company posted a net loss of $104 million in the quarter. That’s an improvement from the $153 million loss in the same period last year. Revenue grew 10% year-over-year.
AI Integration Coming to Snapchat
Snap announced a partnership with Perplexity AI that brings conversational search directly into the Snapchat app. The feature launches in early 2026 across global markets.
Perplexity will pay $400 million over one year using a mix of cash and stock. The payment begins as the rollout reaches users worldwide.
CEO Evan Spiegel explained that Perplexity gets default placement in the chat inbox. The AI startup maintains control over its chatbot responses within Snapchat.
The company won’t sell advertising against Perplexity’s answers. The deal helps Perplexity attract more subscribers while Snap distributes AI capabilities through its platform. Snapchat users keep access to the existing My AI chatbot alongside the new Perplexity integration.
Snap also approved a $500 million stock repurchase program. The company plans to establish a separate subsidiary for its Spectacles augmented reality glasses.
Q4 Outlook Tops Forecasts
Fourth-quarter revenue guidance landed between $1.68 billion and $1.71 billion. The midpoint of $1.695 billion edges above the $1.69 billion Wall Street estimate.
Adjusted EBITDA guidance for Q4 ranges from $280 million to $310 million. Analysts expected $255.4 million.
Average revenue per user hit $3.16 in the quarter. That beat the $3.13 consensus estimate.
Finance chief Derek Andersen highlighted challenges in North America. The large customer segment remains a headwind to overall revenue growth. The company sees stronger performance from small and medium-sized businesses in other regions.
Regulatory Headwinds Ahead
Snap warned investors about potential user declines in the current quarter. Australia passed legislation requiring social media platforms to block users under 16. The law takes effect next month with penalties for non-compliance.
Other jurisdictions are implementing similar age restrictions. Platform-level age verification from Apple and Google adds another layer of complexity. Utah’s age verification requirements become fully effective in May 2026.
The company said daily active users may decrease in Q4 due to these regulatory factors. Internal changes like the Snapchat+ subscription rollout could also affect engagement metrics.
Snap shares were down 32% for the year through Wednesday’s regular session close. The stock typically experiences large swings following earnings announcements.
After initially jumping 25% in after-hours trading, the stock settled at a 15% gain. Perplexity’s revenue contribution starts flowing to Snap in 2026 as the search integration completes its global launch across different user segments and geographic markets.
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