Snap and Perplexity End $400 Million AI Integration Deal

Snap has officially ended its $400 million partnership with AI search startup Perplexity, dissolving a high-profile agreement that would have integrated Perplexity’s conversational search technology directly into Snapchat.

The deal, first announced in November 2025, was disclosed as terminated in Snap’s latest quarterly earnings report. The companies “amicably ended the relationship in Q1,” Snap said, adding that its forward-looking sales guidance now assumes no revenue contribution from Perplexity.

A High-Value AI Bet

Under the original agreement, Perplexity was set to pay Snap $400 million in cash and equity over the course of one year. The partnership aimed to embed Perplexity’s AI-powered search engine into Snapchat’s Chat interface, enabling users to ask questions and receive conversational answers without leaving the app.

At the time of the announcement, Snap CEO Evan Spiegel positioned the collaboration as part of Snap’s broader strategy to enhance content discovery through AI. The company said it expected revenue from the arrangement to begin contributing to financial results in 2026.

However, signs of friction emerged earlier this year. In February, Snap disclosed that while the integration was being tested with select users, the companies had “yet to mutually agree on a path to a broader roll out.”

Strategic and Financial Implications

The termination underscores the challenges of structuring large-scale AI partnerships between consumer platforms and fast-growing AI startups. For Snap, the deal represented both a revenue opportunity and a way to embed advanced AI capabilities directly into user conversations. For Perplexity, it offered distribution to Snapchat’s hundreds of millions of users.

With the agreement now dissolved, Snap will need to reassess its approach to conversational AI integrations. The company has emphasized its ongoing interest in collaborating with innovative partners, suggesting AI remains central to its product roadmap.

Snap’s Broader Performance

Alongside the announcement, Snap reported that daily active users grew 5% year-over-year to 483 million, while monthly active users rose 5% to 965 million. The company attributed the growth to product updates including enhancements to Snap Map and its augmented reality Lenses.

While the Perplexity deal will not contribute to near-term revenue, Snap signaled confidence in its broader financial trajectory, citing accelerating revenue growth and improved margins in the latest quarter.

Perplexity has not publicly commented on the termination. The end of the partnership leaves open questions about how both companies will pursue distribution and monetization strategies in an increasingly competitive AI landscape.