Snap Inc. (NYSE: SNAP) is making waves with two big announcements that have investors sitting up and taking notice. First, there’s the $400 million deal with AI startup Perplexity to integrate their conversational AI search engine right into Snapchat’s chat interface early next year. And second, the company unveiled a $500 million stock buyback plan, signaling confidence in its own future. It’s no wonder the stock price surged 13% right at the market open today.
The AI partnership is a game-changer for Snapchat’s user experience. Instead of just sending messages, users will soon be able to ask questions and get AI-powered answers right inside their chats. That’s a smart response to the growing demand for AI-enhanced social platforms, where interaction goes beyond mere messaging. This helps Snapchat keep pace with, and maybe even catch up to, other platforms like Instagram and TikTok, which have been pushing AI-driven features aggressively.
On the financial side, Snap’s announcements couldn’t be better timed. The company had a tough year with shares down over 30%, but the promise of future growth locked in by the Perplexity deal, coupled with the buyback plan, has reversed sentiment swiftly. The buyback is particularly telling. It’s Snap’s way of putting its money where its mouth is, buying back shares to potentially boost value for shareholders and signal belief in the company’s trajectory.
Speaking of trajectory, Snap’s recent third-quarter numbers showed solid progress with $1.51 billion in revenue, beating expectations and reflecting growth in daily active users. The $400 million cash and equity deal from Perplexity adds a whole new revenue stream that doesn’t depend on advertising, which is a notable diversification for Snap. It also underlines the rising importance of AI in social media, not just as a feature but as a core aspect of user engagement and growth.
Snapchat’s AI story isn’t new, it already has the ‘My AI’ chatbot running on tech from OpenAI and Google. But bringing in Perplexity’s search engine is a big step up, creating a richer, more interactive AI experience. The hope is that this makes the app stickier, especially for the younger users who make up the bulk of its audience.
Of course, no big tech move comes without risks. Perplexity faces ongoing legal challenges related to data use, which could complicate matters. But for now, Snap seems confident that partnering with an AI innovator is the best way forward.
With a 13% jump in stock price as the market opened today, the Perplexity deal and the buyback plan have clearly resonated with investors. Both moves together paint a picture of a company ready to innovate and invest in its future, setting the stage for new growth in a competitive social media world.
