Snapchat logo is seen in this illustration taken July 28, 2022. REUTERS/Dado Ruvic/Illustration
(Reuters) -Snap shares jumped 18% in premarket trading on Thursday after its $400 million partnership with startup Perplexity AI reassured investors that the social media company could catch up to larger rivals in the artificial intelligence race.
The Snapchat parent's shares had risen 16% after market hours on Wednesday following the news.
Perplexity's artificial intelligence-powered search engine will be integrated into Snapchat, to better position it against rivals such as TikTok and Meta that are preferred by global marketers.
"Compute cost implications over time are unclear, but it's wild to think about Snap actually delivering something that approaches Meta AI on a relative shoestring budget," RBC analysts said.
CEO Evan Spiegel said responses to user queries would be controlled by Perplexity through their chatbot inside Snapchat and would not be used to sell advertisements.
Revenue from the deal is expected to start reflecting in 2026, with the startup set to pay Snap $400 million over a one-year period through a combination of cash and equity.
On Wednesday, Snap beat analyst estimates for third-quarter revenue and forecast fourth-quarter revenue between $1.68 billion and $1.71 billion, compared with analyst estimates of $1.69 billion, according to data compiled by LSEG.
Snap's results follow reports of upbeat quarterly revenue from Meta, Alphabet and Reddit.
Pinterest
Up to last close, Snap had lost 32% this year, while Pinterest was down about 11%.
(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Sahal Muhammed)
